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This contemporary Business Economics paper is divided into two sections. Each section has different tasks, namely, tasks 1 and 2. Task one of the paper deals with the analysis of demand and supply with the first question in the task explaining the law of demand with the aid of a diagram in two scenarios moving along the similar demand curve and changes in the curve. The second question in task one explains in detail the law of supply and its movement along the same supply curve and changes in the curve with the assistance of a diagram. Second section of the paper, task 2, deals with comparing and contrasting theories and models in 21st and 20th-century modern economics and relating them to current business practices.
1.1 Explain the law of Demand, movement along the same demand curve (with the aid of diagram), and changes in the demand curve (with the help of diagram).
All factors held constant, the Demand law states that the quantity and price of a given service or product remain inversely related (BLAU & MACKIE, 2017, p. 76). This means that an increase in the cost of products leads to a decrease in the number of products demanded by consumers. On the other hand, when the price decreases, the number of services or products demanded increases (ACEMOGLU, 2016, p. 78).
Movement along the same demand curve as seen in diagram 1a below shows increased changes in the quantity of products needed leading to varying prices from one commodity to another (BLAU & MACKIE, 2017, p. 91). For example, when the price decrease from P1 to P2, as shown in the diagram, it increases the quality demanded to move from Q1 to Q3. At the same time, when there is a rise in price from P2 to P1, it will go ahead and make sure that there is a decrease in the amount of products demanded from Q2 to Q1. All these are shown in the diagram labeled diagram 1a below, and it presents a thriving movement all along the identical demand curve.
Additionally, demand curve changes mean that a difference in the demanded quantity resulting from altering demand effects affects the Demand other than the price of services or products (BLAU & MACKIE, 2017, p. 101). This means it is either a rightward or leftward shift of the curve as an outcome of the changes of all the factors that previously were held constant. This then affects Demand instead of price. The main factors that lead to such changes include changes in consumer’s income, changes in the area population, changes in individual expectations, changes in prices of substitute and complementary products, and future expectations and price changes (ACEMOGLU, 2016, p. 121). For example, in this case, if there is an increase in the total population as compared to the existing one, then this change will lead to a shift in the rightward way of the demand curve. The outcome of this if the price is (P), the quantity demanded them would increase from Q1 to Q2 as presented in the diagram below labeled 1b.
The law of supply clearly states, when all the additional factors are held constant, the quantity and price of supplied commodities are directly interrelated (ACEMOGLU, 2016, p. 71). This means that when there is an increase in the price of goods, then the supply, on the other hand, increases, meaning that there is also an increase in the number of profits due to a high number of sales. An increase in sales results in to increase in the amount of cash received, meaning also profits are increased day after the other (ACEMOGLU, 2016, p. 67). This leads to business growth as they are now selling with profits and not making any loss.
Movement that occurs along the supply curve happened when the number of goods supplied change with a fall and rise in price when the other supply determinants are kept constant (ACEMOGLU, 2016, p. 39). As shown in the graph below, the difference is what is referred to as movement along the supply curve. , move along a supply curve aims at representing the variation of all the quantity supplied of a given well with a change in its price when all other available supply factors are held constant. It happens in two types that include contraction and extension. Extension, in this case, occurs when there is a rise in the quantity or cost of the goods supplied. Similarly, contraction happens due to a decrease in the amount or price of the commodity provided (CLAESSENS et al., .2014, p.179). All the two affect the supply curves differently, as seen in the figure below. From the figure below, suppose 20 is the actual milk price, and 20,000 litres is the total quantity of supply. When the price increases from 20-30, the quantity supplied increases to 30,000 litres, making the curve move from point B to C, this is the movement referred to as an extension of the supply curve. Likewise, when the price reduces to 10, the amount of milk supplied reduces to 10,000 litres making the curve move from point B to A in a movement called supply curve contraction. This means that price increase leads to a rise in the number of commodities supplied by suppliers as they are making profits making the supply curve move smoothly without any alteration. When the movement is as seen in the diagram below, then the firm is making huge profits. All this explanation can be presented in figure 1. Below
Fig 1. Movement along the save supply curve.
The total amount of goods that suppliers or producers are willing to supply at the marketplace changes even if all the factors are constant. Non-price factors include tax, natural elements, aspects of production costs, and the current technology state. These are the ones that lead to changes in the amount of goods supplied. When the quantity of those products that are provided changes due to the mentioned factors above, then the supply curve does not shift entirely instead of extending. An excellent example of this is when it happens to introduce new and modern technology in firms that assist in minimizing the cost of production (ACEMOGLU, 2016, p. 107). This, in the end, induces the production of extra units of a good without changing the actual price, as seen in the diagram below. The movement of the supply curve happens in two ways that is rightward and leftward. In rightward, it occurs when there is an increase in the commodity supplied due to favorable changes at the same price in the supply curve. Also, in the case of leftward shift, it happens when there is a decrease in the amount of supplied quantity of commodities in the curve. This can be elaborated in the diagram below as it shows well the leftward and rightward shifts of the supply curve when SS remains the original supply curve and Q the quantity supplied at a set price P. Then due to those favorable factors, one can notice an increase in the production of commodities and a rise in supply from Q2-Q. This happens even without changing the price. The rightward shift is caused by a decrease in taxes and cost of production, improvement in technology, and expectation of future fall in prices by sellers. On the other side, the leftward shift of the supply curve is caused by an increase in taxes, the use of old technology, unfavorable weather conditions, and the increasing cost of production for the commodities, according to UNITED NATIONS (2020). All these are the ones that cause changes in the supply curve.
Compare and contrast emerging theories and models in 21st century contemporary economics with those of the 20th century, and relate both of these to modern business practices.
Today, as the world is coming from recession at a slow pace, some theories and models are emerging in this 21st century compared to those there during the 20th century (STAFF et al, .2018, p. 32). All these theories act as a good measure of the recovery of the economy. The emerging approaches are discussed based on the leading proponents of economics that include the Marxian, Keynesian, and neoclassical. All these emerging theories go hand in hand and ensure that they provide assistance making all the models work more effectively. Economists Marxian, Keynesian, and Neoclassical both aim to promote their theories while comparing and contrasting them (STAFF et al, .2018, p. 67). It can be noticed that new college learners in economics primarily teach each other neoclassical economics. This happens as its principles are vital and applied in any conceptual method that can be used to illustrate the capitalist virtues that include how prices adjust for it to reach equilibrium as the supply and demand volume changes. This is applied to explain the meaning of optimal valuation of resources in the new contemporary economics.
The 20th-century neoclassical theory explains well the rationality and value of the human agency, going to the extent of asserting the productive ability and people’s preferences compared to the modern Keynesian theory that emphasizes the influence caused by it by institutional power and mass psychology (STAFF et al, .2018, p. 103). Keynesian, at the same time, argues that all interrelated macroeconomics structures are used to determine the behavior of a given individual. Through the use of this two, understanding these theories makes them different from the Marxism theory. Marxism theory argues that neoclassical theory aimed to assist the reign of the then leader Augusto Pinochet. Through this, the approach becomes different from the rest compared to the 20 and 21st centuries.
Similarly, comparing the above theories, one can learn that, unlike Keynesian and Neoclassical theories, the Marxism theory of the 21st century is known for rejecting any form of logic that is determinist and instead goes ahead and argues that all objects or events present within the economy mostly are over determined. Hence, this makes the work of the emerging theories of 21st century different compared to the previous century as this one discusses the overall economy in terms of political, social and economic aspect that affects the entire world in economic view. This happens as 21st-century economists have discussed GDP as the first measure of any country’s economic progress (STAFF et al, .2018, p. 77). This makes the 21st century forced to call for more global goals and ambitious to make sure that they meet all the expectations set for them. As a result, it gives a huge to the current emerging theories of the 21st century compared to the 20 century in multiple ways. This happens in how local to global economies within states are created simultaneously, making sure that there is no fall short on an individual’s basics.
Also, comparing and contrasting the emerging theories of the 21st century and those of the 20th century, it is essential that through them, one can see the big picture that happens from the self–contained market to the economy of the embedded work. The 20th-century models comprise a hardworking and ambitious group of known economists, making them dominate globally (DRUCKER, 2017, p. 87). Unlike the 21st century models, the 20th century comes up with a fine narrative concerned with the tragedy of commons and household domesticity. This, as compared to the 20th century, has assisted a lot of 21st-century people to push multiple communities towards ecological and social collapse. It, therefore, makes it high time for us to come up and write modern economics of the 21st-century story fit that promotes the society for its benefits but not for the use of the few. The 20th-century economic models advocated for the rational economic person compared to the models of the 21st century that advocate for equality among each of us. This means that within the models presented in the 21st century, it is said that human nature is far much richer as compared to others, and we should proceed and make sure that it is embedded in the world that we live in. This, compared to 20th-century economics, shows that 21st-century economies have played a vital job in the growth and development of different economies around the world (DRUCKER, 2017, p. 107). Through having this, the way through which things economically were conducted in the 20th century has changed to the next level, and individuals are now able to move to the next step and make sure that they develop their societies.
Both the models of the 20th and 21st centuries relate well to the current business practices. This happens as they are the ones that give way forward in terms of the best business environment through which a given firm wishes to go. Through the PESTLE analysis, many businesses today have come to understand that there are multiple ways through which they need to learn before setting up their business in new places (DRUCKER, 2017, p. 99). They have realized that the theories have assisted them in creating a good midst in terms of new economic models and approaches that keeps them evolving and looking for better and good ideas to develop and improve their performance from one step to the other. It becomes easy for any business today to operate as what they need is already known through having multiple economic thinkers. They are ready to put it into practice and understand areas that they did not understand well. Hence, this makes rethinking economics the best way to go as through doing so; they will be in a position to move the business to the next level. Through having these theories, it means that business today are able to practice all the modern techniques that aims at allowing them to move to the next level in terms of expansion. When we have new technologies and innovations put into operation, then it becomes easy for any organization to pull up its resources and focus on coming up with new and unique brands that will help them beat competitors without facing huge challenges.
Summing up, it is true that the paper has outlined well demand and supply and their movement along the curve and their shifts with the help of diagrams. Through these changes, they have showed when all the other factors are held constant. Changes in demand curve have been shown and explained well the same way changes in the supply curve have been shown. The paper has also compared and contrasted all the three up-and-coming models and theories of the 21st century new economics with the previous one. Lastly, as seen from the paper, there is a clear relation of the theories and the modern business practices and how they have been assisted by them in making sure that business operates easily in a conducive environment. In short, the paper has clearly given a good analysis of the contemporary business economics.
ACEMOGLU, D. (2016). Introduction to modern economic growth. https://ebookcentral.proquest.com/lib/uvic.
BLAU, F. D., & MACKIE, C. (2017). The Economic and Fiscal Consequences og Immigration: a report of The National Academies of Sciences, Engineering, Medicine. Washington, DC., National Academies Press.
CLAESSENS, S., CLAESSENS, S., KOSE, M. A., LAEVEN, L., & VALENCIA, F. (2014). Financial Crises: Causes, Consequences, and Policy Responses. Washington, D.C., International Monetary Fund.
DRUCKER, P. F. (2017). The theory of the business. https://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=1798775.
STAFF, N. R. C., DRUCKMAN, D., SINGER, J. E., & VAN COTT, H. P. (2018). Enhancing organizational performance. Washington, D.C., National Academy Press.
UNITED NATIONS. (2020). World Social Report 2020: Inequality in a Rapidly Changing World.
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