Contemporary business economics

The report will also explore the factors that influence the demand and supply curves, as well as the elements that cause changes in supply and demand. Additionally, the study will cover both modern and traditional theories and concepts of business economics.

TASK 1

1.1 Law of Demand

Demand Curve

In business economics, a demand curve is a graph that represents relationship between price and demanded quantity of specific product of organization. It is a basic visual representation of the relation between the cost of product and the demand for product in the particular market place. These two factors are directly related to each other. This relationship is also considered as the law of demand. Various authors have provided different definition for demand curve. 

According to the law of demand, when the other factors are considered as constant, than the price of specific product is inversely proportional to the quantity demanded by consumer. In simple words, it can be understood as when the price of the product is increased by the company, it leads to reduction in the demand for the particular product in the market place.  This is a perception in human behaviour to stay cautious about spending money. As the price of a product reduces, it leads to increased demand in the market, and if price of particular service or product increases, then it can reduce demand of company services and products in specific market. This relation is most important for the organization because their profit is directly related to this relationship between price of goods or services and quantity that is demanded by the consumer base (Chu, Huang and Zhou, 2018).

Movement along the demand curve and shift of the demand curve:

Each enterprise faces a certain demand for the goods it supplies within the market. There are varied components that impact the demand and these effects can be seen by observing the changes within the demand curve. Therefore, movement within the demand curve mainly occur due to following factors:

Change in demand: This is inclusive of the components that relate with the increase and decrease in demand. Therefore, the change in the price of attributes, income of consumer and other preferences of consumer play a crucial role in terms of coping with the demand for a commodity and changes in service. Therefore, two components are: 

• Increase in demand- At time, when the income of the consumer increases this also affects the price of commodity and supply of the commodity that remain the same (Fæhn, Hagem and Rosendahl, 2017). Henceforth, if the income of a consumer enhance than the purchasing power of consumption increases.
• Decrease in demand: In this, if the income of the consumer decreases, the price of the product and supply stay the same. Within the condition, if there is a decrease in income of the consumer, the purchasing power of the consumer also decreases.

Change in quantity demand: This is termed out as movement along the demand curve that mainly caused by a change in price. Therefore, the change in quantity demand defined as-:  

• Expansion and contraction of demand: Expansion of demand occurs in a situation when quantity demand is higher due to fall in price of commodity (Jadidzadeh and Serletis, 2017). On the other hand, contraction of demand occurs in situation where quantity demand of a commodity is less due to fall in the price of the commodity.
• Increase and decrease in demand: Increase in demand caused by change in demand due to number of components such as change in income, distribution of income and change within taste and preferences. In a situation where cost of commodity remains constant, the increase in demand tends to be proportional to the rise in demand for commodity at the given price. On the other hand, decrease in demand termed the fall in demand of commodities at given price.

Factor affecting the demand:

            There are number of components that impact the demand of the commodities. Therefore, these are defined in the following manner:

• Change in people's income: The rise in income of an individual enhances the demand of commodities (Gilroy, Kaplan and Hantula,  2018). Therefore, fall in income leads to fall in demand of product attributes.
• Change in population: The enhancement in population leads to rise in demand and decrease in population leads to fall in demand.
• Change in income tax: Increase in income tax leads to fall in demand as individuals has less money as they have less money to spend. On the other hand, decrease in income tax results in a rise in demand for product and services as people have more disposable income.
• Change in price of substitute goods: These are those commodities that can replace the desire of another good or service. For example- Tea and coffee, etc.
• Change in price of complementary goods: These are those goods and services that are jointly demanded. For example, Ink and pen, car and petrol.

1.2 Define the law of supply and movement along with supply curve and change in supply with factors.

Law of Supply: This states that the components, while other factors are renaming constants. Therefore, the price and quantity supplied for commodities are directly related with each other (Sasatani and Eastin, 2018). In addition to this, the relationship between price and quantity supplied can be defined as positive relationship. Henceforth, the rise in cost is connected with increase in quantity supplied. 

Movement along with supply curve:

This is defined as the graphical presentation of change in supply for a good and this brought about by change in its own price when other things remain constant (Sasatani and Eastin, 2018). If the price of commodities changes, than it impacts the supply of that particular attribute. Henceforth, at time when price of commodities varied, this results in movement along with demand and supply curve.

Shift in demand curve: This is defined as diagrammatic representation of change in supply that brought with change in other components that determines the supply of commodity rather than price. Therefore, these are defined in following manner:

Rightward shift: It is termed out as the graphical presentation that leads to enhancement in supply by change in detriment other than price. Thus, the causes of rightward shift in supply are:

• Fall in the rate of interest, wage and rent.
• Downfall in the price of raw materials.
• Use of advanced technical tools and development in knowledge among the workers.
• Decrease in the taxes as indirect and corporate.
• Enhancement in the accessibility of resources.

Leftward shift- This is termed out as the graphical presentation that leads to decrease in supply by alteration in other detriment than the cost. Therefore, the causes related with leftward shift in supply curve as are-

• Increase in rate of interest, wage and rent.
• Enhancement in price of raw materials.
• Downfall in the availability of resources.
• Enhancement in indirect and corporate taxes.

Factors that affects the change in supply-

            The component that impacts the change in supply are defined in following manner as-:

• Natural conditions- The change in climate conditions impacts the supply and production process of commodities. Therefore, droughts, floods and earthquakes all are bound to affect the production adversely.
• Technical progress- Volume in the supply and production highly influenced by progress in the technique of production (Gilroy, Kaplan and Hantula, 2018). For the manufacturing sector, this is one crucial component. With the use of improved technical advancement reduces the cost of production and it raise the profit margin. This can be stated that degradation of technical advancement enhances the cost of production.
• Transport improvements- The improvement in the mode of transport leads to reduction in cost and this enhance the supply of products. Thus, conditions of supply change.
• Government policy- Enhancement in the taxes enhance the cost of production and this impact the supply as this reduce due to low profit margin rate. In addition to this, tax concession, increment in subsides enhance the supply as this make more profitable for firm to supply products.
• Decrease in cost of production- It is defined as the business can able to supply the more commodities at each price. Therefore, the lower cost of production may occur due to lower ways and decrease in raw material cost etc.
• Fiscal policy- This can be stated that fiscal policy of the legal authorities also impacts the supply of goods and services (Sasatani and Eastin, 2018). Henceforth, the high import duty will restrict the supply and lower duty leads to stimulate it. These are the components that bring changes in the conditions of supply as this leads to increase or decrease.

TASK 2

Compare and contrast emerging theories and models in twenty first century contemporary economic with 20^th century, relate to the modern enterprise practices.

Contemporary economic is based on the policy that review academic published on the behalf of western economic association along with the economic inquiry. Likewise, the economic history, it has investigation about the economic issues in the long-term perspectives. The contemporary economic theories are not only containing the information about financial crisis but also focused on the historical roots of economic ideas (Vasileva-Dienes and Schmidt, 2019). It undertaken into account a wide array of conjunction with the history of facts and pure theory. it constitutes the comprehensive approach for study on the basis of economic in modern societies. The economic in 21^st century, the winner of John bates Clark as an American economist has significant because it can be represented the economic future as determined various method and subject areas. The economists are influenced the public opinion as well as policy which supports to improve the business condition in global marketplace. In contrast, economic theory is based on the idea that embedded with the historical, institutional culture and socio-political contributes a response towards every day problem (Vasileva-Dienes and Schmidt, 2019).  

In 21^st century, neoclassical theory consists of economic growth and dominant in the until 1960 to 1970s. it also relates with the new modern business where treated investment in the employments rate and fixed assets. It become crucial factor in terms of growth and development. on the other hand, growth model is tested on 20^th century on behalf of data and analysis that how it can be participated in the economy’s development (Ilzetzki, Reinhart and Rogoff, 2019). However, in last decade, it has been considered the big changes in the economic growth theory. there are some reasons behind the change. The substitution between the worker and capital may differ across various sector especially, sales and production outlets because it has rapidly increased the technology expansion in organizations (Narula and et.al., 2019). This type of assumption may imply for long term running business while GDP growth increases. The growth theory must explain about the economic power within country where how it influences the policy for long term benefits.It has observed that there are significant variations in terms of development between places within same nations. In this way, it indicates role of substantial and also geography as well as climate change. However, such factor does not influence the long-term trends.

Acemoglu & Robinson’s theory contradict with the cause and effect among political as well as economic institution, and difference between economic growth as well as institutions. It can be determined the causes that indeed often observed. It can happen the reverse relational action that generate confliction between political parties (Ilzetzki, Reinhart and Rogoff, 2019). Sometimes, it was possible to achieve the technological progress in market while rapidly increasing education level in 21^st century. It directly turns into develop a strong social demand in political change, which led to shift in political policies and economic. On the other hand, Ricardo’ rent theory deals with identify the less productive resources in 20^th century that could be used as profitable in 21^st century. It can be aggregated with the relationship calculation form overall expenditure data or information (Ilzetzki, Reinhart and Rogoff, 2019). There are various underdeveloped classical institutions always influence the entire economic system on the behalf of individual behaviour, rather than concern on their significant impact of production condition.

Multi-agent model, it is defined the process where each step performs the significant action and reflected in next stage. It is considered the simple procedure that can free people from equilibrium. It applicable within modern business to analysis overall market value and promote technologies to increase the production in global marketplace (Ilzetzki, Reinhart and Rogoff, 2019). the model has incorporated with the evolution of behaviour and transformation into the evolutionary economics. In this way, it has contributed to satisfy overall economic conditions in global world.

Nationalistic development model is promoted the social community to develop the economic conditions and engaged with the different policies (Ilzetzki, Reinhart and Rogoff, 2019). The model comprises with both empirical applicability and internal logical to analyse the economic condition but sometimes, it fails to engage with the richness and reality of social economic. The critical situation, nationalism ideology continues to shape the entire global policies where faced many challenges in 21st century. For example- Migration and other type of diaspora will create the economic, social and cultural which no bind people across the world. At that time, it has pushed the government to revise its nation building whereas many builders oppose to globalization as a potential threat (Vasileva-Dienes and Schmidt, 2019). Other hand, it has significantly boost’s the nations power and influence to adopt advanced technology in business development. The subs-state nationalist continues to compete for human supports and their loyalty towards organizations. Currently, it also reconsiders the independence, sovereignty, autonomy and self-determination while increasing the interconnectivity in global world. 21^st century unfolding the different forms of transnationalism which led to predict the actual end of country, sate while examine the confliction in regards of ethnic. In order to determine the situation of collapse because of increasing cold war (Vasileva-Dienes and Schmidt, 2019). At same time, it is widely declining the state-nation in the face of globalization. It would be beneficial to concern about the relationship between cosmopolitan issue and nationalism.

CONCLUSION

In above discussion, it concluded that Business economics is becoming an area that can apply economics which consists of different models and theories. It can be analysis entire business of the organization and also considered the important factors, which directly affect on organizational economic stability.  It has summarized about various aspects of demand curve and supply curve for Tesco plc. Furthermore, it can be determined the factors that can affect the demand and supply curve and various factors that brings the changes in supply and demand. Also, consideration of modern and traditional theories and concepts of business economics.Assignment Help is available for those who need assistance in understanding these concepts and their application.

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