Module Number: BMP4003

Module Name: Business Environment

Year/Trimester: 2021-22/Semester 2
Module Tutor/s: Nahrain Aoudishow/Dr Shohail Choudhury
Assessment Number 1
Assessment Type (and weighting) Individual Presentation with Voice Over - 50%
(10 to 15 Minutes)
Assessment Name Article Review - Economic Concepts and Models
Assessment Submission Date Saturday 09 April 2022 at 23:59

0
 Executive Summary

This report deals with the major macroeconomic concepts such as demand and
supply. It can be seen that the business organisation will be required to ensure that
it can maintain its profit margins efficiently. It can be said that a business
organisation will be required to make amends when the price of the commodities is
rising. This report has made a pictorial representation of how demand and supply
work alongside elasticity issues. At the end of the analysis, a conclusive statement
regarding the entire report has been provided.

1
 Table of Contents
Introduction...................................................................................................................2

Demand and Supply.....................................................................................................3

Costs and Production...................................................................................................6

Conclusion....................................................................................................................7

Reference List...............................................................................................................8

2
Introduction
The microeconomic concepts are some of the major aspects which are required to
ensure organisational efficiency. It is noteworthy that an organisation needs to
ensure that it can meet the demand of the market to earn economic profits. Demand
and supply are two of the most important factors that are required to be considered
when it comes to microeconomic discussion. This report will shed light on major
microeconomic aspects such as elasticity and market supply. It will also use the case
of an increase in the price of the trampoline for practical alignment. Various
economic concepts such as profit and cost management will be discussed in the
report. The report will majorly focus on the demand and supply alongside with
economic profits of a business organisation.

3
Demand and Supply
Demand and supply are considered to be two of the major factors which influence
the market the most. These two microeconomic concepts help an organisation to
make better profits. Demand can be defined as a person’s desire to purchase a
commodity concerning their monetary power (Cowell, 2018). The demand law states
that the consumer will demand more of a product if the prices of the same are falling.
On the other hand, it is required to be noted that the demand will fall once the price
starts to increase again. This is considered to be the consumer side of the market
(Léautier, 2019). While on the other hand it is required to be noted that an
organisation will be able to control the supply of the product (Varghese et al., 2019).
Supply is the number of goods made available to the market by the suppliers. A
business organisation generally functions to derive profit from the market. Thus, the
law of supply mentions that a supplier will supply more of a commodity if the price
increase. On the contrary, it is noteworthy that a business corporation will supply
less of a product if the price falls.
Thus, it can be said that if the demand for the product increases it will imply that the
price of the commodity has fallen. One very important part to note here is that the
corporation will be required to consider certain assumptions in case of both demand
and supply law. The major assumptions of these laws are:
 The income of the consumer does not increase
 There is no change in the price of the related goods.
 The technological aspect of the market is constant.
 All other economic factors other than the price of the commodity in question
remains constant.

The major aspect to note here is that a business corporation is required to ensure
that it can analyse the market demand properly. Market equilibrium is reached when
the demand and supply are equal to each other. In other words, it can be said that
the market equilibrium is the point where the demand and supply curves meet each
other (Tardieu and Tuffery, 2019). In addition to this, it can be said that the market
equilibrium is the point where the consumer and the seller compromise. One very
important aspect to note here is that the market equilibrium is meant to bring in
market efficiency. There are different ways in which the business organisation will be

4
required to ensure that it can meet the requirements of the consumer.

5
 Figure 1: Market Equilibrium
(Source: Economics Online, 2021)

In the case study provided it can be seen that the prices of the trampoline have
increased by a total of 50%. One important concept to note here is that the price
increase is due to the outlying issues of shipping costs. Thus, the sellers have no
other option other than selling the products at a higher rate. The reports also mention
that the demand for Chinese products has increased a lot in the past few years
(BBC, 2022). Brexit can be considered to be one of the main reasons behind the
increase in prices of goods.
The elasticity of demand deals with how responsiveness is the demand for a
product concerning its economic outliers such as the price or income of the
consumer (Kreps, 2019). It can be seen from the case study provided that the
demand for the trampoline has diminished due to an increase in cost however the
demand has not completely evaporated. This means that the product is elastic but
not highly. In addition to this as per the major reports, it can be properly seen that the
demand for trampolines for major purposes such as gymnastics has directly
decreased in the year 2021 due to an increase in prices (Statista, 2022). Inelastic
demand is one where the change in economic factors does not impact the supply or
demand of the product in any way. However, as 9the trampolines are not necessary
for survival they are not inelastic.

6
 Figure 2: Decreasing participation in trampoline based gymnastic sports in
the UK

(Source: Statista, 2022)

The market structure is another form aspect that impacts the economy and the
product. Some of the most common market structures are – perfectly competitive,
monopoly, monopolistic, and Oligopoly (Sanches et al., 2018). In perfect
competition, there are an unlimited number of sellers selling homogeneous
products and there are no barriers to entry or exit of the market. On the other hand,
in a monopoly market, there is only one else who can control the price of the
commodity (Steiner, 2018). In addition to this, it has to be noted that in the oligopoly
market there are a smaller number of competitors and a high number of
consumers. In the oligopolistic market, the market players are extremely affected
by the decisions taken by the competing company. It can be said that the shipping
industry is also an oligopolistic one.

The report provided clearly states that the sellers are looking forward to increasing
the amount of supply as the price are also increasing. The main reason behind this
is the fact that increasing the amount of supply when the cost rises will allow the
organisation to maintain the rates of profit it has been earning. If the costs are
higher then it is economical for the organisations to make more and sell as said by
the trampoline dealers in the UK (BBC, 2021).

7
Costs and Production
One of the major issues that have to be considered here is that an organisation will
always like to control its expenses. The cost of production pertains to the amount the
organisation spends to ensure that it can produce the goods efficiently. There are
majorly two different forms of goods – Variable and Fixed. The variable costs are the
ones that change regularly. On the other hand, as the name suggests that the
corporation will be required to ensure that the fixed costs are maintained properly
(Dahal and Rijal, 2019). It is noteworthy that an organisation will be required to
ensure that it is managing the ratio of variable and fixed cost-efficiently. One
important aspect that is required to be noted here is that in the long run every cost is
fixed in nature.
From the case study provided it can be seen that the cost of production will be
impacted by the shipping cost. In such cases, the organisation will either have to sell
more of a commodity or ensure that it can control the production units. The economic
profit of the organisation directly depends on the revenue and the cost incurred.
Economic Profit = Revenue – Cost
One very important aspect to note here is that the corporation will be required to note
that in case of economic profit the organisation will be required to control its costs
but the quality of the products need not be compromised. Now as the corporation
can ensure that it can control the cost it can properly mention the organisational
aspects. Now shipping cost can be considered as one of the most important
variables costs for the business. A rise in this cost means that the per unit variable
cost has also increased. It is noteworthy that Brexit has also increased the number of
labour costs which is another variable aspect of the organisation (Sandford, 2022).
Thus, there is an increase in the cost of major factors of production. It is only logical
that the organisation increases the price of the product to maintain the profit margin.
The business profit of the organisation can be used to bring in better pieces of
equipment or working opportunities for the organisation (Ketokivi and Mahoney,
2020). It is noteworthy that there are many different ways in which the corporation
will be required to ensure that it can use the profit earned for the improvement of the
organisation.

8
Conclusion
At the end of the analysis, it can be concluded that the microeconomic concepts of
demand and supply are two of the most pivotal aspects of organisational success. It
has been seen that the increase in the cost of production will make the organisations
sell more as it will be more economical. It has been also concluded that there are
different market structures and the shipping industry belongs to the oligopolistic
market. There are different ways in which the corporation will be required to maintain
its profit margin and ensure that the cost of the products does not impact the quality
of products and services.

9
Reference List
BBC, (2021). Trampoline prices 'to soar 50% on shipping costs' [Online] Available
from: https://www.bbc.com/news/business-55702243 [Accessed 6 April 2022]
Cowell, F., (2018) Microeconomics: principles and analysis. Oxford: Oxford
University Press.
Dahal, B.R. and Rijal, S., (2019). Production economics and determinants of potato
production in Nuwakot, Nepal. International Journal of Applied Sciences and
Biotechnology, 7(1), pp.62-68.
Economics Online, (2020). Market Equilibrium [Online] Available from:
https://www.economicsonline.co.uk/competitive_markets/market_equilibrium.html/
[Accessed 6 April 2022]
Ketokivi, M. and Mahoney, J.T., (2020). Transaction cost economics is a theory of
supply chain efficiency. Production and Operations Management, 29(4), pp.1011-
1031.
Kreps, D.M., (2019) Microeconomics for managers. New Jersey: Princeton
University Press.
Léautier, T.O., (2019) Imperfect markets and imperfect regulation: An introduction to
the microeconomics and political economy of power markets. Cambridge: Mit Press.
Sanches, F., Silva Junior, D. and Srisuma, S., (2018). Banking privatization and
market structure in Brazil: a dynamic structural analysis. The RAND Journal of
Economics, 49(4), pp.936-963.
Sandford, A., (2022). A year since Brexit: How bad are the UK's labour shortages
now [Online] Available from: https://www.euronews.com/2021/12/30/a-year-since-
brexit-how-bad-are-the-uk-s-labour-shortages-now [Accessed 6 April 2022]
Statista, (2022). Number of people participating in gymnastics and trampolining in
England from 2016 to 2021 [Online] Available from:
https://www.statista.com/statistics/899256/gymnastics-trampolining-participation-uk/
[Accessed 6 April 2022]
Steiner, A., (2018). The global book: micropublishing, conglomerate production, and
digital market structures. Publishing Research Quarterly, 34(1), pp.118-132.
Tardieu, L. and Tuffery, L., (2019). From supply to demand factors: What are the
determinants of attractiveness for outdoor recreation?. Ecological Economics, 161,
pp.163-175.

10
Varghese, J.S., Swaminathan, S., Kurpad, A.V. and Thomas, T., (2019) Demand
and supply factors of iron-folic acid supplementation and its association with
anaemia in North Indian pregnant women. PLoS One, 14(1), p.e0210634.

Appendix

11
12
13
14
15
16