Table of Contents

Introduction...........................................................................................................................................2
Task 1....................................................................................................................................................3
A. Explain the economic problem of scarcity and demand resource allocation in managing an
economy with examples drawn from the UK and using your chosen organisation, explain how
equilibrium in the market can be achieved.........................................................................................3
B. Evaluate the importance of differing market systems in general and evaluate the role of
opportunity costs in determining how an organisation of your choice makes economic decisions....4
C. Using an organisation of your choice, explain what is meant by elasticity of demand and assess
the importance of elasticity in market interactions............................................................................5
Task 2....................................................................................................................................................6
A. For a business organisation of your choice that is operating in the UK, explain the implications
of its pricing and corporate objectives on its operations....................................................................6
B. Compare how prices can be set in different market structures such as perfect, monopolistic,
monopoly and oligopolistic competition and analyse how the market structure and operational
decisions of the chosen company affect its performance...................................................................6
C. Evaluate how UK regulations affect the market power of your chosen organisation, that is, how
regulations affects the market structure and your organisation..........................................................7
Task 3....................................................................................................................................................9
A. Analyse how the structure of the UK economy has changed in the 21st Century and how it has
affected the business environment of your chosen organisation........................................................9
B. Evaluate the tools available to meet macroeconomic policy changes in the UK and the success of
the UK governments policies in achieving macroeconomic objectives and how these changes
affect your chosen organisation.........................................................................................................9
C. Evaluate the performance of the UK economy in the global market using specific key indicators
such as the GDP growth rate, inflation and unemployment, etc. and how the economic performance
affects your chosen organisation......................................................................................................10
Task 4..................................................................................................................................................12
A. Demonstrate the theory of comparative advantage using relevant illustrations from emerging
economies against the UK economy and justify the advantages and disadvantages of free trade
using a UK-based case study). How does the theory affect your chosen organisation?...................12
B. Analyse the impact of emerging economies such as the BRICS on the developed economies in
general and evaluate the consequences of the recent domestic and global economic shocks on the
UK economy. How do the emerging economies affect your organisation?......................................12
Conclusion...........................................................................................................................................15
References...........................................................................................................................................16

Introduction
Economics refers to the study of scarcity. It includes the study of Production, distribution
and usage of services and goods. The society made choices of what should be manufactured,
where shall it be distributed and at what price. They would produce everything at unlimited
range, so the unlimited needs of the people would all be fulfilled to the core which is boring
as the study of economics would have been absent then. What if there is scarcity of certain
goods, then what would be, the alternative is the main point upon which people should focus.

Task 1
A. Explain the economic problem of scarcity and demand resource
allocation in managing an economy with examples drawn from the
UK and using your chosen organisation, explain how equilibrium in
the market can be achieved.
The needs of the society are unlimited and so is the perishable resources which become
scarce after using it for a certain time as they cannot be recyclable. The society needs to use
their perishable goods smartly. The study of Economics would be absent from the world if
scarcity wouldn't have existed. After consuming or using one good the other one is gone
means that its scarce. The amount of the good refers to its price which is expensive. Even
demand for a particular good influences its price (Biondi & Zambon, 2013). Manufacturing
cost and labour cost influence the price of the scarce goods. For example, Tesco PLC, UK
based public limited organization invests its money in allocating the scarce resources like
labour, soil and capital. Since, the government will not be able to take complete responsibility
due to lack of money and enough knowledge, in a mixed economy system any private
company along with following the guidelines imposed by the government can enter the
business. Buyers and Manufacturers have different takes towards changing price with time.
Demand is reduced along with low price when the price is high while supply accelerated and
demand is increased while supply lessens (Folsom et al., 2012). As per the theory of
Economic, a certain price will establish a balance between the demand and supply known as
Equilibrium price or Market clearing price. Perishable resources should be availed by both
the parties to exchange in return of a huge incentive. For example, the price of the goods sold
by Retailers is set by them after dealing with buyers over time. Either the consumer buys the
product at that price or does not at all. The buyer might disapprove of the price at the mall
and knows that its of no use to fight over it as they have no influence over the cost. However,
if a lot of buyers fight over the price so the seller would be forced to reduce the price to sell

the product. The sellers in this way can set their own price if they want. A smart seller would
do the market survey properly before setting the price, an exchange of facts between the
consumers and the seller is vital.

B. Evaluate the importance of differing market systems in general

and evaluate the role of opportunity costs in determining how an
organisation of your choice makes economic decisions.
Educating the masses regarding brands, advantages of the products and improving the
relationship of the stakeholders makes calculation the most crucial step. This process of
market evaluation is done before the firms fiscal year, which is an extension of the planning
process and forming a budget (Friedman, 2012). All the planning is done in order to meet all
the marketing planning and objectives to achieve the lacking. The goals at the end of the year
are formed after assessing the market performance so far. Product, venue, marketing and cost
out of which areas need the most improvement for fighting better competition effectively.
Products, services and ideas formed by the company are whether fulfilling the requirements
of the stakeholders and customers. For example, Tesco PLC falls under perfect competition
type, it chooses output, sales output instead forming the price of their products. The total cost
along with the opportunity cost of investing money. The possibility of selling maximization
after adapting effective sales strategies, possibility of minimum profit and loss from
minimum sales of the product and production of those products is illogical or type of
questions for analyzing before they start using the market or they could even invest their
money as opportunity cost in any other product which would yield better output (Boons et al.,
2013). The direct costs of life are known to all but they are unaware of the indirect costs. For
example, when a buyer invests money in a cheeseburger, most ignore the indirect costs
attached to it known as the opportunity cost. Choosing an action over the other is the crux of
it. One can choose a burger or put that many as savings depends upon the person. When one

stands to gain and at the same time lose something in return. At this time, the person is
measuring the opportunity cost. The amount of energy, time and fulfilling need are also a
vital part of the entire course of action. The use of opportunity costs in our everyday lives is
like if one wants to start a new business or buy a house. The person measures the
consequences and advantages of the action that which is more beneficial. If they are
concerned about making a huge investment, then they always check their balance again and
again and calculate their investment, whether at that time it is good to invest such a huge
amount or not.

C. Using an organisation of your choice, explain what is meant by

elasticity of demand and assess the importance of elasticity in
market interactions.
Price elasticity of demand means the relation between the price and the quantity of the
product demanded by the buyers. If the price goes up while the revenue falls down, then it is
called elastic. If both the revenue and price go up, then the demand is inelastic. It is vital for
a manager of any firm to understand the elasticity of the products sold by the firm so that the
manager knows whether to raise or lower the price of the product and when. If the product
fulfils needs irrespective of the price, then the demand is inelastic. For luxurious products the
demand will be elastic and if the price increases little, then buyers will not show much
interest (Simanis & Milstein, 2012). For substitute products, demand will be elastic like a
small increase in the price of olive oil will force women to use sunflower oil instead.

For

example, Tesco PLC is in retailing business so if the product sold by them has an excessive
demand for the product like Dove then either the price of the good will increase with excess
demand and revenue goes down then it is the case of sheer elasticity.

Task 2
A. For a business organisation of your choice that is operating in the
UK, explain the implications of its pricing and corporate objectives
on its operations.
Satisfaction of price value refers to the process of evaluating the correct price on a business
firm's operation. The managers have limited profit maximization while the stakeholders do
not get involved on day to day business of the firm. They might give their shareholders a
minimum share of profit so that the shareholders are happy while the managers enjoy their
work and get along with their co-workers more well by not getting sacked. The problem of
separation between owners and managers has always been prevalent for a

long time.

Maximization of sales refers to increase of market share value which would lead to monopoly
and more profit in the future while managers would work for bigger and reputed companies
which is an add-on to their image (Clua et al. 2011). For example, Tesco PLC focuses on the
demand of the products and not just the price of the products which is judged by the
customers as it falls under the perfect competition where the level of competition is very
high. Instead of the price, the demand for the product is seen and concentrated upon it more.

B. Compare how prices can be set in different market structures

such as perfect, monopolistic, monopoly and oligopolistic
competition and analyse how the market structure and operational
decisions of the chosen company affect its performance.
Monopolistic competition is a type of market where products are sold by them that are
different from the buyer's idea of the product. This generates when the same product has been
sold under various brand names, where every individual brand is different from the other. For
example, Lux, Liril and Dove. No legal or financial problems can stop such firms from
entering the competition and can leave whenever they want. Product differentiation is one
sole factor that differentiates them from perfect competition. Oligopoly is when many small

number of firms compete with each other while the level of competition is very high as they
all are on the same level. Each firm by oligopoly firm handles a major part of the total supply
of the product, so if one firm leaves, then the changing price of the product will affect the
other firm's actions (Rubalcaba, 2011). The reaction of this type is interdependent and not
dependent unlike monopoly or perfect competition. For example, Media and Banking are
oligopolic type. Unlike, the perfect competition under which the Tesco PLC falls in the
demand for the product is seen more in the picture than adjusting the price of the product as
per their requirement since it is left with the customers. The type of market structure under
which the company falls their behaviour is also like that itself. Market share includes a
number of firms in the market, their market share value and the factors that affects the
market. The actions, reactions, output and existence in the market are factors on which they
are judged upon by the competitors. A very few competitors competing with each other in
the market leads to less competition, but the actions might be very competitive like the UK
with the Super market area (Safiullin et al., 2012). The existence or absence classifies the
structure of the market. It is said to be concentrated when competition is missing prevalent in
perfect and pure monopoly. For example, in the case of Tesco PLC, if the governemnt
imposes a standard quality requirement then the company has to follow irrespective of what
so in that case they have to either increase or decrease their price of the product after
changing their company's policy for their own goodwill.

C. Evaluate how UK regulations affect the market power of your

chosen organisation, that is, how regulations affects the market
structure and your organisation
Setting the price of a product by the demand and supply of the product is market power. With
such power any company can make their huge profit turnovers. They are the price makers as
they balance the market share. The influence of the firm in the industry is the market power.
Firms are known to have zero market power like in perfect competition. No control in their

hands as there are other firms as well who do the same job. Companies can analyze the
demand and supply which will affect the price of the product. There are laws which will
disallow any company to set the price of their own in order to establish a healthy competition
(Folk et al., 2013). For example, Tesco PLC might have to change their activities if there is a
change in the exchange rate. If pound is used in other countries where Tesco carries out its
business operations then the demand and value of currency will be seen depreciating but the
demand and dsale of the products in the home countries will be seen accelarating.

Task 3
A. Analyse how the structure of the UK economy has changed in the
21st Century and how it has affected the business environment of
your chosen organisation.
The International economy was introduced in the 20th Century with free flowing goods,
serivces and money in history. It had experienced increased output, improvement in daily lives
and trading norms like never before. During the First world war, all the above trading and
expansion seemed a major downfall. It deteriorated its position till the second world war. The
growth of the economy lessened than it had been almost fifty years back then. Changes in
technology and changing scenario in global economy was adapted every now and then at that
time. Introduction of new competitors, improving living stabdards of common people and
rising economy were all a major part of the economy which had come into force (Cho et al.,
2014). For example, in the case of Tesco PLC new machines, modern techniques of
production, advanced transportation and its high level competivity factor all lead to
mdernization and excessive profit turnovers unlike the 20th century whose development
schemes are of no value at all.

B. Evaluate the tools available to meet macroeconomic policy

changes in the UK and the success of the UK governments policies in
achieving macroeconomic objectives and how these changes affect
your chosen organisation.
The entire operation of the economy a sa whole comprises the macroeconomic policy. A
strong and running economy environment capable of producing fruitful output in terms of
creatiin of jobs, wealth and increasing living standards. Fiscal, wealth and exchange rate
policy are the three key points of macroeconomic policy which maintains the balance in
economy. Changes in government expenditure and taxes imposed and loan for the economy
come under this field. The Reserve Bank Of Australia is responsible for regulating monetary

policy. It is responsible for changing cash rate like the interest rate on loans offered in the
market. It is influenced by flow of capital overnight. The value of the currency against other
currencies is called Exchange Rate policy. Since 1983, the value of the Australian Dollar has
been floating and is influenced by forces in the market. For example, the Tesco PLC 's
business will get affected by the governments change in tax rate. If the tax rate is reduced then
the quality of the product is increased while the price will also change. It can also be utilized
in advertisements provided if te company wants as it will yield more profit for the
organization.

C. Evaluate the performance of the UK economy in the global market

using specific key indicators such as the GDP growth rate, inflation
and unemployment, etc. and how the economic performance affects
your chosen organisation.
The Government's aim is to acquire low rate of price inflation, which can be achieved through
changes in monetary policy interest rates as they have been formed since 1997 by the Bank Of
England. Fiscal policy which is governed by the government can be done to promote growth
over time. Improvement in the income of the masses and tax systems can lead to major change
in the economy (Wild et al., 2014). Supply of goods will improve the market or business and
will make it efficient. Expansion of real gross domestic good will keep inflation low and
deteriorate the growth along with its consequences. Employment opportunes for everyone
where everyone is earning a minimum sustainable wage every day. For example, if the
government decides upon the minimum wage of labour for everyday, then Tesco PLC might
have to increase the wage which will cut down its profit maximization in all avenues as it will
be directed in labour wage (Foss & Loasby, 2013).
Economic indicators are allotted by the economists in order to judge whether the economy is
really working well or not. By this the work of the Policy makers becomes easier and better.
The measurement of national income, expenditure and output express the growth or downfall

of an economy as its also measured in terms of per capita (Smallbone et al., 2012). The
relationship between the national output and principal investment, levels of inflation and price,
different types of unemployment and their reasons, competition in export, production capacity
of labour and their stability in international competition are all major key points which assess
an economy's performance. The level of the borrowing capacity of other countries is also one
vital factor that judges an economic strength.

Task 4
A. Demonstrate the theory of comparative advantage using relevant
illustrations from emerging economies against the UK economy and
justify the advantages and disadvantages of free trade using a UKbased case study). How does the theory affect your chosen
organisation?
When another Country can produce the same good at lesser cost, then it is called as
comparative advantage. It means that the country is capable of producing even cheaper goods
than the rest so it is capable of a lot of producing all kinds of goods. It means that they will
have an acceleration in the growth of their economies. This is very different from absolute
cost refers to as the cost of producing a good. The other countries can also earn money from
trading as far as they both have different goods to exchange and the demand for the product is
also maintained in a healthy way (Boons et al., 2013). If the demand of any such particular
good falls, then it will get very difficult for any country to operate or trade with that particular
good otherwise the price will increase a lot for that particular good. For example, Tesco PLC
being an organization specializing in retail market does not have particular wine brand
demanded by the customers so they might offer the neighbouring countries a particular rate in
exchange of good or money for the wine so that the customers get satisfied to a large extent
and buys that particular brand of wine from them only at the best rate possible (Biondi &
Zambon, 2013).

B. Analyse the impact of emerging economies such as the BRICS on

the developed economies in general and evaluate the consequences
of the recent domestic and global economic shocks on the UK
economy. How do the emerging economies affect your organisation?
An emerging market moves from a closed to an open economy while an account is
maintained within the system. For example, the Soviet Union and Eastern Block countries. As
a growing economy the growing reprogrammed to strengthen the economy will make the

economy much stronger than before. A firm economy invites more foreign collaborators or
investors seeing the nature of the economy. Thus, its exchange rate system is also reformed
for the better. Many large donors invest their money in huge stakes. When the economy sees
a good amount of growth or promising economy, then all will accept and would like to invest
in it. The crisis created in free market capitalism kind is by its own. It is untrue that the
market can be operated on its own. The United Nations has evaluated many reasons for the
impact of economic shocks to the economy which are excessive changes in exchange rates,
increasing budget deficits, decreasing income from tax and fiscal rate, reduced usage of tax
and trade financing, unshedding of confidence in finance companies to generate more and
more of money due to bad economy, lessening of trading among the world, lessened income
from tourism whihc is a vital part of income for any and every economy, negativity in
balance and trade balances especially, all cater largely to bad economy or deterioratng
economy. For example, Tesco PLC has been under pressure by the government a lot of times
to achieve even a better output of their activities. Supply, demand, elasticity of demand and
reactions of customers for their new products, scale of economy and the cost of
manufacturing all force any company to change their policies as per the market and even
because of the government (Rubalcaba, 2011). Tesco PLC has to make decisions as per the
supply and the demand of the market. Considering the high demand even the company will
produce a higher quantity of goods demanded by the buyers. Tesco evaluates the reactions of
their customers before and after introducing a new product in the market to assess its value.
By keeping the price level under control they can keep a check on the quality of the products
sold by them (Anderson et al., 2013). Tesco PLC can easily produce a good amount of goods
at one time as they need a good response from the customers for those particular product then
there would absolutely be of no use at all if the reaction or the demand is bad by the
customers. So, if the demand is high, then there is definitely higher chances of producing

large scale of products in the market in order to satisfy their customers to the fullest. If the
cost of the product rises along with its price than the company will produce a larger amount
of products which will lead to more profit making for the firm. The need of the customers
will also be fulfilled by this as the product would be available in the market at most of the
times.

Conclusion
The internal and external factors both should be considered very well before making any
foreign or domestic production of goods or business activities as per the analysis found after
the market research. The Tesco PLC, a public limited company has achieved the goodwill of
their stakeholders more effectively than ever before after operating their business activities in
the most efficient way possible. Improved customer services, regulations of employment and
prevailing all the facts to all the members in the most convenient way possible. The UK
market is very competitive where the Tesco PLC has to undergo changes in their monetary
issues and even in their output process so that they can yield maximum profit. Economic
policies and competitors policies play a vital role in establishing ones busniess effectively and
on a large scale too. Since, it falls under the perfect competition the demand of the product
and its increase is given more importance than any other factor. The price of the good is
determined as per the interest of the buyer. The company has to follow the UK regulations
along with the EU in order to function their business operations. Being the super market
industry leader which is getting more and more competitive each time focuses more on the
price and product differentiation keeping in mind all the domestic and international points in
mind.

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