Economics for Business MOD3327: Supply, Costs, and Market Competition

This report delves into the intricacies of supply and its influencing factors within the context of the UK economy. It explores how inputs and costs directly impact production decisions and subsequently affect the supply of goods and services. The analysis extends to the concept of perfect competition, examining its characteristics and how it shapes the supply dynamics within UK-based industries, particularly the manufacturing sector. The report further investigates both short-run and long-run production decisions under perfect competition, highlighting the significance of factors such as labor charges, capital, raw materials, and entrepreneurship. The Anglo American plc company is taken as an example. It concludes by emphasizing the importance of identifying market trends for effective supply management and economic growth.

Economic for business

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Why inputs and costs impact the supply of goods and services in terms of production
decisions......................................................................................................................................1
2. Explain the perfect competition market and how it impact the supply of goods and services
by applying in any UK based industry........................................................................................4
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
*Krugman and Wells. 2020. Essentials of Economics. New York: Worth Publishers. Pages 355-
451....................................................................................................................................................9

INTRODUCTION
Economics is the term which assist in making decision with the utilisation of resources. These
resources are utilised to produce the goods and services for attaining a goals. Supply is the words
which explains the outflows of wares with the aim of fulfil the need of the consumers. The
supplier of goods have to be updated about the requirements of the market and about the trends
also. In this report, the inputs and cost which are important for the supply of the equipment is
justified by considering the economy of UK. The effect of the production decision on the supply
of goods also explain by having example of the economic condition in UK. The role of perfect
competition in the long and short run market is explained and the components which can affect
the supply of products and services in the manufacturing industry is explained.
MAIN BODY
1. Why inputs and costs impact the supply of goods and services in terms of production
decisions.
Supply: It refers to the sum total of amount of goods and services which are available to
the customers. The supply of products have been done according to their demand in the market.
After that, the products are sold in the competitive market place. The basic concept of demand
and supply state that the increase in the prices of goods leads to the increase in supply of goods
too and decrease in the prices of goods implies reduction in the supply. In simple words, it can be
said that the prices and supply of products have a positive relation. Raw material, labour etc. are
consider as the input and its prices combine with the cost of goods to make the final selling price.
Basically, supply means the amount of products which a businessman can make available to its
customers.
Law of supply implies that there is a positive relationship among prices and quantity
where other factors remain constant. It has been found that the behaviour of manufacturer or
producer changes according to the prices of products or services along with the change in time.
It can be seen by the use of graph which is given below:
1

above mentioned graph is showing the direct positive relationship between the quantity
suppli8ed and prices. The graph is showing upward sloping as when the price of good was p3,
the supply P6 was Q3. With the increase in the prices, the quantity also increase and shift to Q2,
Q1 and so on.
Input: Land, labour, capital and entrepreneurship are four categories of factors of input.
It has a vital role in the creation of goods and services which can be measured by the Gross
Domestic Product of United Kingdom.
 Land: It can be defined as the natural resource which is available on the earth on which
the crops, buildings and offices come. It covers a wide prospective in the economy of
country. Land also include oil, oceans, solar energy, coal, sea, rivers and many more as
renewable and non renewable resources.
 Labour: A mental and physical capacity is required for the purpose of producing goods
and services which is generally known as labour. The supply of labour has been made
on the basis of population, leaving of work and age attitude. It can be measured on the
basis of output of a person after completing his working time.
 Capital: It refers to the amount of currency which have been used for the purpose of
doing production of goods and services. It include factory cost, equipments, commercial
buildings, machinery and many more.
2

 Entrepreneurship: Capability of bearing the risk which can occur while supplying the
i8tems or services is known as entrepreneurship.
Costs: It refers to the amount of money which is done as expenses by the businessman for the
purpose of providing products and services. It covers labour charges, raw materials,
manufacturing expenses and many more (Young, M. 2021).
Product Decisions: It refers to the decisions which are taken by the owner of the business which
work as advantage to the organisation as well as the demand of customers:
Impact on the production Decisions:
1. Labour Charges: It has been found that the decisions related to the input which are
being used in the supply of products and services taken on time will directly effect the
efficiency of labour which result in the increase in the gross domestic Product of the UK
economy. It is also related to the improvement of living standard of people of a specific
country because of the raise in the wages and decrease in the final costing of products and
services. For instance, if the prices of products raise in the manufacturing industry, it will
affect the GDP of country. In 2010, recession came which result in the shortage of
products.
2. Capital: The supply of capital is increase as the time pass. Hence, it is necessary that the
decisions regarding the supply of goods have been taken correctly. The infrastructure
which bis required for the development of a country is in the hand of the government of
country. the concerned authorities will prepare the budget al9ong with providingt the
sufficient resources when needed. The mismanagement from the superiorities and delay
in the decisions can have the negative influence in the UK economy.
3. Raw material: The materials which are being used for the purpose of production of
goods and services should be available on time, any delay in the resources can not be
handled. Otherwise, its impact can be seen on the entire economy which result in the
decrement of national income of country. For instance, United Kingdom has faced a slum
in the economy after 2020. its affect can be seen on the country that there are no raw
materials for producing goods and services. It result in the huge losses.
4. Entrepreneurship: It is based on the two factors which are, opportunity and the
willingness to hold the executive position in the country and to run the organisation. In
UK it has led down in 2019 when the change in the government happened. There was a
3

sort of distortion in the country and the alliances were formed against the government. It
turned down to the decrease in the economic condition of the country. Because the
decision related to the production were taken but the people of the country were not
satisfied and the trade unions were formed, which also influenced the supply of the goods
or services.
5. Quantity of production: When the labour is inappropriate in fulfilling the quantity
which is to be supplied, it has a direct impact on the production decisions. If the quantity
of the produced units is not fully manufactured then how it could be supplied. It results in
taking the decision regarding the supply of the goods or services incorrectly (Young, M.
2021). For example, in the UK economy, the demand of the item has increased but the
production of the units is still the same, it will affect the market condition and will result
in the shortage of the product in the market and decrease in the supply. Hence, it will
have an impact in the economy of UK.
6. Identifying trends: It is a dynamic leadership process to identify the trends rather than
waiting for the changes in the market. It will increase the decision – making power and
would be able to supply the good and services at the correct time. It will also improve the
opportunities for the country and will help in enhancing the economic conditions of UK.
2. Explain the perfect competition market and how it impact the supply of goods and services by
applying in any UK based industry.
Perfect competition is the theory which occurs when all companies sell the goods, equity does
not impact on price. In this type of marketing condition companies are able to enter and exit
without barriers, buyers have perfect or full detail and companies cant examine cost. It is the
statement of conventional assessment where rival are their highest possibility level. In this, the
evaluation is based upon the consistent effects from the user being. In general, it can be known
as supposed conditioning in which marketer is setting their products & services value on the
basis of market-rate.
According to J robinson 1934 , The condition where various entities offering the
same thing for the same cost, eliminating the condition of monopoly.
Supply curve in the Perfect Competition:
A perfectly competitive structure supply curve is the parting of the marginal cost graph that
lying above the minimum of the mean mutable valuation. It has involvement of the total and
4

marginal revenues & costs indication which is being used to finding maximization of incomes.
The key terminologies are the profit-maximise condition of any organization which is Marginal
and Total Revenue. It has two concepts for presenting the major beneficial area:
 Short-run Manufacturing Decision-making:
It is the time period where one factor is fixed rather than others ones having variable nature. It
consist a three factors that impacts the short term decisions such as variable costing, winding up
process and revenues of the system. The short-run supplying curves in the highly competitive
market segment is the marginal costing curve-line at or above the ending point. It is showing the
economic level of the manufacturing industry.
This graph shows the short-term supply curving analysis within the perfect challenger. As seen
in the above diagram, the line stays at or above the closing point, so it is giving economic
situation. If the concern is having graph-line below the specific point, so it is not applicable
because they are not expected to produced in that range.
 Long-run Production Decision-making: It mention the period where all components of
industry & costing division are changeable in nature. This concept of calculating supply
is the addition of a program of existing market's short-run curve-shape. It has link with
the points of constant return in the market of short duration. It has three periods of
productivity cycling which are:
5

 Constant scaling-return.
 Decreasing returns to scaling.
 Increasing return to scale.
The above graph explains the manufacturing company affected division because of short span
profit making companies having benefits. That' s the situation of having less profitability in the
long run production.
Manufacturing industry of UK:
The commercial enterprise which produce the good and services in the market of UK is very
diverse. It has a broad range of products of various types of sectors such as Anglo American plc
it is a UK based company founded in 1917, its headquarter is in UK London (Krugman and
Wells. 2020). It produces platinum, diamond, cooper , nickel, iron ore and metallurgical coal.
The manufacturing sector of the UK economy is the largest sector, after the marketing and the
service industry. It contributes majorly in the growth rate of economy.
Impact of the perfect competition market in supply:
6

 Prices: In this type of the market, the cost of the goods is the main device. Because here
no one has the power to impact the cost of the particular commodity. So the
manufacturing industry has to determine the disbursal on this basis only, understanding
of its revenue as well as the profits. For example, there is a company in UK called Anglo
American plc who produce the diamond and iron etc. these goods are counted in the
prestigious goods the price of the goods increases or the cost exceeds the price of the
item. In this, the purchaser will also keep on purchasing the products as long as the
satisfaction level of consumers reaches at the top. which means, when the demand for
the items is equal to the number of products produced at the same price.
 Number of sellers: There is a various sellers in the market who provides the goods at
the varied cost to the purchasers, that gives a opportunity to the buyers to move to other
marketer in the market. It states that there are limitless figure of manufacturers and in the
perfect competition market there is no barrier of entry and exit which make in difficult to
determine for the producer to idealise the quantity which has to supplied in the market. In
UK, it is a constraint which will effect the economy of the country.
 Competition: The competitors in the market segment are increasing in the daily basis.
The level of the competition is influenced by the figure of the purchaser and the marketer.
The cost of the goods provided to the retailers by the producing business will be low in
price and rich in the quality, this will effect the supply of the goods and service in the
market. The other competitor will also happen to decrease the cost of their items with a
better customer experience . This will effect the market and economy on the basis of long
run.
 Maximize profit: The main aim of the competitive markets is to increase their
profitability by supplying the huge amount of the commodity in the market place by
valuing its point at the lowest price and by considering the supply curves of the
manufacturing industry.
7

CONCLUSION
It can be concluded from the report that the supply of good and services is the essence for
utilising the resources in the best possible manner. The factors which influence the economy of
the UK is the labour, entrepreneurship, assets and land. These inputs are the heart of any
economy because the absence of these factors puts the put a direct impact on the production of
the unit. If these goods are not produced and supplied at the correct time, it will impact the
economy of the country and will also effect of the gross domestic products and the national
income. It could also tend to the penetration of taxes. So, the production decisions can effect the
supply in terms of the delay in the sending the raw materials and the costs which are used in the
manufacturing of the products. The perfect competition market which is fundamentally used to
set a standard for the present market constitution like dominance. This existing competition
differentiates the firm and their commodity in the manufacturing industry which happens to
increase in the prices to market more profit compared to the rival firm. In this market, the
businesses has the ability of dominant the pricing structure in the industry.
8

REFERENCES
*Krugman and Wells. 2020. Essentials of Economics. New York: Worth Publishers. Pages 355-
451.
*Young, M. 2021 Lecture 6: Supply curve, inputs, and costs. MOD3327 Economics for
Business. Anglia Ruskin University of London.
Young, M. 2021 Lecture 7: Perfect competition and market efficiency. MOD3327 Economics for
Business. Anglia Ruskin University of London.
ARUL Digital Library sources available online (you must include ARUL website URL for any
ARUL Digital Library sources used in references)
9