MOD005243 Business Economics Assignment Level 3

TASK 1

1.1 Economic problem of scarcity and demand source demand resource allocation to manage economy

Scarcity simply indicates towards shortage of resources and elements which helps to assist business operations smoothly. For any country it is required to manage the available resources to meet the requirement and needs. Good and quality products are services are the prime needs of society which only be fulfilled and managed with perfect utilisation and allocation of resources. High demand of products influence price structure of raw products and basic resources. Management of scarce resources is one of the key functional areas for an economy because lack of scarce resources fails to fulfil the demand of society, and this become the reason of high price. Net effect fall upon the supply management of organisation.

            For example Tesco plc is one of the largest retail industry in the UK and contributing valuable efforts to improve and develop the economic structure of UK. To fulfil the demand of society it has to pay attention upon proper management of scarce resources such as soil, labour, fuel, capital and natural resources.

1.2 Role of supply and demand in an economy and elaborate how equilibrium in the market is achieved

            Market equilibrium indicates towards the stage and steps where the demand of product remain equal to supply of the product (Chandler, 2012). The price of demanded product remain equal to the quantity of the supplied product is considered as equilibrium price. As per this concept demand of the product decrease when the product price remain high. Theory of economy contains the concept of equilibrium price or market clearing price to balance demand and supply. Mostly the price of products influenced by scares resources and perishable resources. For example price of the goods sold by Tesco is determined by dealing with buyers after a particular time. There is a contingent situation occurs while dealing with buyers and suppliers.   

            In this situation the price of products are decided on the basis of demand. The current market price is adopted to sell the products and services. The price of products are set where supply meets with demand. This is considered as stage where balance between two opposite functions which remain associated with demand and supply.

1.3 Importance of diverse market system and the role of opportunity cost subject to economic decision

            There are type of market systems are used in organisational context to make business operations and functions more viable and transparent (Granger, 2014). These systems are basically used to improve the market structure of organisation. This helps to build string relations with stakeholders and communities. There is a process of market evaluation adopted by organisation in order to make budgets and market plans. Market goals are achieved with the help of communicating organisational objectives. Nature of products, Venue, cost,  marketing are the main factors which are found in marketing system. These helps to find out better competitive marketing strategy. This not only build the strong product market but also build strong stakeholders relations.

            Tesco is very concerned with its market system. It is running its business and operations in high competitive market conditions. It majorly focus upon sales output rather then forming price of products and services. Sales strategy, consumer market analysis, analysis of profitability index, and possibility of minimum profit and loss are adapted by organisation on periodic basis.

1.4 The role of opportunity costs in determining how economies make decisions

            Opportunity cost is considered as the cost of sacrificing of existing option to new one, it plays vital role in terms of analysing the cost and sustainability of new investment plan with organisation's aim and objectives (Annerstedt and Währborg, 2011). This cost contains the advantages and disadvantage of opting new option in terms of energy time and fulfilling the needs of business. This contains huge market investment and resources to adopt new business plans for development and growth. calculation of investment remain based upon cost of existing investment. This plays vital role in respect of decision making and helps to analyse the viability of alternative option.

            Tesco adopted new marketing techniques and approach to assist the marketing structure and enhancing the sale graph of organisation. This is mainly helps to analyse the aspects which remain associated with analysing opportunity cost of existing option. Effectiveness of new investment plans are evaluated by comparing the benefits of current option and existing one.

1.5 Importance of Elasticity in market interactions

            As per theory of economics elasticity defines the relationship between the demand of product and price of product. Price elasticity demand majorly associated with analysing the potential aspects between price and the quantity of the product (Barbero, Casillas  and Feldman, 2011). Price gets higher when product demand remains high and vice a versa, this is called as elasticity of demand. If both the price and the revenues go up then it is considered that demand is inelastic. This concept remain helps managers to understand the meaning and dimensions of price variation parallel to demand. There is an optimum price is set up and determining the price of products and services.

            If the products fulfil the needs and requirements of products and services then also demand of product become inelastic. It is seen that he elasticity of Luxury products remain low because the demand remain low in comparison of normal good. For example the demand Tesco deals in retail products and elasticity of demand of home appliances and products high.

TASK 2

2.1 Implications of pricing and corporate objectives on operations of business

            An effective pricing strategy helps to improve the sales and growth graph of organisation towards sustainable growth. Optimum price of products helps to maintain satisfaction level among customers and consumers. Process of evaluating profit and measurement it is required to maintain the level of demand and price of products and services. It is difficult for stakeholders and clients to participate in daily operations and management. Price optimising techniques basically helps to analyse the important aspects such as cost of raw material, labour and direct expenses incurred with in production process (Sarasvathy, Menon and Kuechle, 2013). Managers keep working in the direction of maximising profitability and building consumer interest whereas senior authorities and stakeholders wants higher returns and profitability. Demand and forecast subject to analysing the price of products done to maintain satisfaction and profitability level of organisation.

            For example efforts of Tesco plc are centralised around managing the balance of demand and price of consumer products at optimum level. Variations in price of competitive prices may lose the interest of customer due to which profitability also decreased. Management tries to control the variations.

2.2 Compare how prices are set in different market structures

            Perfect competition: There are type of  competitive products found in organisational context. Organisation can not vary the price of products and services in perfect competition market structure (KorsakienÄ— and TvaronavičienÄ—, 2012).

            Monopolistic environment: this is one of the type of market structure in which products are sold by various buyers and ideas of the product.

            Oligopolistic competition: this is one of the market structure in which small number of firms and entities work in market. There is a lack of cut throat competition found in this market competition.

2.3 Analyse how firm's behaviour is affected by market structure and operations

            Determining the price of products and services and supply of the products are determined in market power. Different market structure influence the pricing strategy of and reduce the credibility of organisation in perfect competition. For example Tesco has lack of controlling power in respect of determining the price of products.

            Sales and marketing operation also based upon the business structure of organisation. Pricing strategies for competitive goods and services remain associated with variations in distributing strategies.

2.4 Impact of regulation on market power in given situation

            Position of organisation in market depends upon goodwill and reputation among customer and market (Gawer, 2011). For example Tesco plc is one of the multinational retail industry which has good brand image in the UK market and there is a lack of Zero contol found in perfect competition. Organisation is able to manage the demand and forecast about luxury products whereas the price variation is difficult in terms of daily consumable products and services.

TASK 3

3.1 Structure of an economy changed in 21^st century

            It has been analyse that UK has looked outward to larger nation for plenty of centuries, while their roles are consistently evolved with them. The UK economy and their places has shifted drastically from the early days in 16^th Century (La Rocca, La Rocca and Cariola, 2011). With the industries revolution of 18^th and 19^th era has made huge impacts on nation in current time. Today , the UK economy is diversified and have stronger spread their influences across the various parts in London. The British economy has also has rich and sectoral mixes. The huge of economy is relies on service market. The UK's industries strength are also reached all corners of the nations.

            Apart from this, they are having sizeable financial sectors from 4% of GVA in east London. There 65% of total GDP is connected to trade businesses which is higher than that in plenty of other wide advanced economies that consists of France, Italy and Japan. It is mostly related with a export strength which is second largest exporter of service in nation. This seems to be increased output, improvement in regular lives and trading norms. Like for example, in accordance with TESCO PLC which is having new machines and modern techniques of production and transportation systems.

3.2 Tools available to meet macroeconomic policy change

            It is seen that macroeconomic policy is associated with the operations of an economy as a whole. In wide term, the global of aspects provides a constant economic environment that is condition to fostering positive and sustainable economic growth for the company. It will needs to done for the purpose of create jobs opportunity, wealth maximisation and increasing standard of living. There are various policies those are associated with the macroeconomic are discussed underneath:

            Fiscal policy: This seems to operate by changes in overall level and composition of government total spending, types of taxes and forms of borrowings. It has been seen that government can directly impacts economic events by recurrent and capital expenses  and directly to the effects of overall spending and transfers on private consumptions.

            Monetary policy: Such kind of decisions are introduced by the alternation of cash rate (Lusher, Koskinen and Robins, 2013). It consist of necessary actions that are made by the central banks as well as other regulatory bodies those are responsible for evaluating size and growth of money supply.

            The success of UK economy can only be attain in case they are following specific policies those are essential for the company. The primary objectives is to make stable as low inflations. The government inflation use to target 2.0% for the consumer price index.

3.3 Measurement the success of a government's policies in achieving macroeconomic objectives

            It has been observed that macroeconomic is related with all essential issues, purpose and policies that affects the entire nation. Every analysts that refers to aggregates is macro economic factors related with the company. The unemployment rate and inflation growth rate of in economic are analyse effectively. There are various aspects those are associated with the measuring organisational overall performance helpful in order to measure their objectives in more effective manner. Some of them are:

            Non inflationary growth: It is known as more stable and effective economic growth and formulation over the longer period of time. It is an economy which is an outward move in their production possibility curve.

            Low inflation: Because of this, there is sustainable growth in the level of prices. The rate of inflation is modified in inflation over a period of time (Cruz and Nordqvist, 2012). Banks should like to keep continuous growth of their rate at which prices will increase at minimum level.

            Low unemployment or full employment: In accordance to labour forces which is fully engaged in productive work. An individual take into account to be unemployed in case current data does not have a job and most of them are still looking for one. The main objective means that as many people who wants to be employed need to work on effective manner.

            Equilibrium in BOP: The government of UK need to target their export and imports in effective manner so that balance in payment can be create on large manner to determine deficit or surplus which is not effective for the nation.

3.4 Economic performance of an economy in the global market

            Profit is one of the most important aspect in activity economic action and gross domestic products which is more similar used to analyse nations specific activities. In short, GDP used to show the overall value of all final goods and total services which is legally develop in an economy in a specific period of time. There are certain indicators such as:

            level of national income: It is seen that total level of national earning and output. Total spending are three key variables which would indicate, whether an economy is increasing during the time of recession.

            Income and wages: In case of operating efficiently, earning would maximise continuous to keep with the total average cost of living. It is an indication that employers need to cut pay rates or reduce their working hours.

            Unemployment rate: It is very significant and measure that number of people are searching for work as a overall percentage of total labour forces. In case of strong economy, the unemployment rate would be lie in between 3 to 5%.

TASK 4

4.1 Theory of comparative advantage using relevant examples form emerging economics

            Comparative benefits is a kind of situations a company use to make a good or service in order to lower opportunity cost that is lower than other nation. Opportunity cost is used to measure overall trade restrictions that are applied in the country (Karatepe,2011). It has been determine that comparative benefits make total trade off worth of them. The buying and their products and services surpass the limitations. There are various types of  comparative theories such as:

            Free trade agreement: It is known as effective areas which is encompassing a trade bloc with the associated nation that have signed a free trade agreement. It is a corporation among at least two nation in order to reduce trade restrictions by using import quotas and tariffs.

            Trade protectionism: It is most reliable variety of planning which is used to protect their trade regulations. One ways is to act tariffs on the tax import. This will increase drastically in the price of imported products. International trade are growing at faster rate to attain maximum growth in coming future.

4.2 Clarify the advantages and disadvantages of free trade for development

            Advantage: This seems to deliver consumers with wide option and benefits by offering minimum prices. Free trade causes global specialisation as it enable the different nation to deliver product in order to gain competitive advantages in coming time.

            Connection with other nation: Global trade and commercial relation is often lead to analyse relationship of knowledge and culture among two different country (Teece, 2012). This will provide a wide understanding between those nation that leads to friendliness transactions.

            Assist to consumers: On a account of free trade the consumers of various nation to delivery appropriate quality of products at low rate and as per their own choice.

Limitation of Free trade:

            Obstacles to formulate Home sectors: In case international products are imported at large, the domestic industries of developing nations need not be able to formulate quickly to superior strength of global sector.

            Rivalry and friction: Finally, free trade is basically rivalry among the trading nations. In other words, commercial outcomes from trade are often leading to create more complications to the company.

4.3 Impact of emerging economies on the developed economies

            In the emerging market which is increasing from a closed to an open market economy. There are certain impacts those are related with emerging economic effects in various developing nations. Such as:

• Change in global assets prices can increase financial development in other developing countries.
• Policy makers need to take into consideration of emerging economies through using appropriate rules and regulation for the nations.

4.4  Impact of recent domestic and global economics shocks to the economy

            The internal economy has been seen as important impacts on UK outputs and inflation over the recent past time (Foss and Knudsen, 2013). Transmission done through the trade mode. However, financial channels and uncertainty are more likely to have under pressure because of government influences on a lot times to attain even more effective output from there overall activities. The total supply and demand of the customers are needed to be determine in effective manner.

CONCLUSION

This report defined the business economics in term of operating and managing businesses in developed economies and diverse market conditions. Theory related to microeconomic theory related to markets are defined in this context. Market power in terms of pricing objectives on a business firm's operations, various market structures, impact of regulation on market power in business situations are discussed. Role of government in the macroeconomic environment in various forms are explained with business context. Impact of developing economies upon developed economies also included in this report. How economic theories can be applied in organisational context subject to trade in international market successfully explained.

Also Read: Impact of elasticity over business decision making

REFERENCES

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