Factors Influencing Demand and Supply

Introduction

There are several factors that determine the demand and supply of the goods and services in the economy, and for economic growth and social development, GDP or Gross Domestic Product is crucial for enhancing the economic performance. The study is effective to identify the factors contributing in the demand and supply of the goods and services. In the recent pandemic era of COVID 19, there are fluctuations of the consumer spending on the retail goods and services which has both negative and positive impacts on the economy. The economy of the UK is experiencing measurable changes due to such pandemic era of COVID 19 where the people are suffering a lot and the government also fights against the situation through policy implementation and new strategic changes. In the next part of the study, the UK government respond and economic policy change will be analysed through which the government can change the spending habits for the retail products and services.

Task 1: Demand and supply analysis of the retail goods

Evaluating demand and supply for the retail products

Demand and supply in economic is the relationship between the quantities of the commodity and services that the producers wish to sell in the market at various price and the quantity that the consumers wish to purchase. Demand is the commodity that the consumers wish to buy which is dependent on price level of the basket of goods and services. There are mainly various factors that influence the demand of the consumers in the market which are prices of the goods, the presence of substitute goods in the market, income generation, the volume of income, the personal choice and preferences of the consumers and seasonal effects (Wang et al., 2019). In the economy, the basic factor influencing the demand of the consumers is price rate of the basket of goods and services. In the retail industry, the consumer choice and preferences for the goods is also important which influence the customers to make effective purchase decision. On the other hand, the price of the retail goods is also another mandatory factor that helps the customers to make their preferences for further purchase. The demand and supply curve can be represented through the diagram below, where in the vertical axis, price will be represented and quantity is measured through the horizontal axis (Chen et al., 2019).

Supply of the good and services is the quantity that the producers refer to sell in the market at significant price level. In this regard, there are also other factors that influence the quantity of the supply that the producer wish to provide in the market which are price of the commodity, stock of the products, availability of the substitute products and others. The equilibrium price is determined by the demand and supply curve, in this regard, the demand curve is downward sloping, as there is negative relationship between price and demand. If price of the goods rises, the demand for those particular goods will fall (Chen et al., 2019). On the other hand, the supply curve will be upward sloping due to positive interlink between the price of the goods and the supply of the goods. If the price of the goods is increasing, the suppliers will try to increase their supply of the commodity in the market for gaining profit. The retail industry is also going through this demand supply mechanism, where the price of the retail goods is determined at the equilibrium point, where the demand curve cuts the supply curve. As per the figure above, the equilibrium price and quantity can be determined, where the demand and supply of the products and services is equal. As per the market condition in the recent pandemic era of COVID 19, there s shifts in the demand and supply curve which will be illustrated further.

Factors for rightward shift of the demand

There are several factors that influence the demand curve to shift in the rightward direction. The rightward shift of the demand curve is the practice where there is increase in the demand for the particular retail goods in the UK. Increasing income of the households is the major factor for rightward shift of the demand, where they can afford better quantity and quantity of products. High population and social development are also major factors for increasing demand, where the demand curve will be shifted in rightward direction. Rightward demand shift will represent the rise in price and quantity of the commodity (Hafezalkotob et al., 2018). Higher price of the substitute products and lower price of the complementary products are the major reason of the rightward shift of the demand curve for the retail goods.

In the recent pandemic situation, there is rise in demand for the necessity goods of the consumers to live a life. The price of the necessary goods are almost similar, where the consumers try to make purchase for their necessity goods, related to health and social care, daily food items and others. The demand for the health products is also increasing in this year, where the individuals are concerned about managing the health condition and improve immunity power to fight against COVID 19.

Factors for leftward shift of the demand

Leftward shift of the demand indicates there is decrease in price and quantity of goods in the market and the major factors for decreasing demand is lack of population, lack of income of the individuals. In the recent years, there is job loss and high unemployment in the economy, due to COVID 19, social distancing and closure of corporate firms for huge loss. Hence, the individuals in the UK cannot afford the goods and services, due to income loss (Amountzias, Dagdeviren and Patokos, 2017).

There is decreasing purchasing power parity among the individuals and poverty rate is also increasing due to such pandemic era, which influences the demand curve to shift leftward. As per the figure, the demand curve shifts towards left which deteriorate the quantity of the consumers they want to purchase (Amountzias, Dagdeviren and Patokos, 2017). Additionally, there is decrease in retail luxury products and increase in necessity products such as daily food, grocery, sanitizer and masks, which are mandatory to live life in such pandemic situation.

Factors for rightward shift of the Supply

The rightward shift of the supply curve can be illustrated through the diagram below, where there are several factors that influence the supply volume to be increased. In the recent pandemic era, there is rightward shift of the supply of some particular goods and services as well as left ward shift of the luxury products in the market, as this is a critical situation, where the individuals require necessity products to live a normal life and survive. When, there is increased in the supply in the market, the curve shifts towards right (Ankamah-Yeboah, Ståhl and Nielsen, 2017).

For example, the supply of grocery items and necessary food items are increasing day to day where the individuals need this for survive in the earth. There are other retail products in the retail outlet, such as sanitizer, masks, gloves and other cleaning products, which are also increasing over the period of time, where the supply curve shifts towards right, increasing population in the UK is also another factor of influencing supply, where the organisations and producers raise their supply of some particular goods in the market. The supply of medicine, pharmaceutical products and services are also increasing in the recent pandemic era due to high rate of diseases and virus spread among the communities (Mollenkopf, Ozanne and Stolze, 2020). Hence, the supply curve shifts rightward for the retail products including medicines, necessary products in daily life, health care products, grocery and food items.

Factors for leftward shift of the demand

There are several factors which influence the supply curve to shift leftward which indicates that there is decrease in the supply of the particular products and services in the market. Reduction of the demand for the luxury product in the retail stress is the major reason of decrease in aggregate supply of the UK which influences the supply curve to shift left.

There is lack of supply of luxury products, where the suppliers do not want to supply their products due to low demand for those particular products. On the other hand, due to lack of income generation and high unemployment due to this pandemic era of COVID 19, there is lack of demand for the products and services in the retail sector which also influence the suppliers and producers to not supply the products in the market, which cannot be affordable by the consumers. Low purchasing power parity as well as high price of the products is also the reason of leftward shift of the supply curve during this critical era (Mollenkopf, Ozanne and Stolze, 2020). These are the major factors which have critical impacts on the supply and demand of the products and services under the retail sector. There is high demand for the necessities and grocery items and low demand for the luxury products due to low income generation, lack of employment opportunities, poor economic condition and trade barriers due to social distancing and lockdown (Cronin and Evans, 2020).

Task 2: UK governmental and economic policies

Policy to influence consumer retail spending in the UK

In the recent pandemic era of COVID 19, the economic growth of the UK is in negative and there is lack of social development for which the economy is at its worst condition due to virus spread, lock down and social distancing. There is government policies and practice which are helpful for the UK society to manage the critical situation. Retail industry is a one of the contributing industry in the UK and export minster is also concerned to measure and enhance the export volume so that the activities of the British retail firms (Gov.UK., 2020a). The retail sales of the UK are hampered and hence the governments take initiative to enhance the activities in the ecommerce in order to support the consumers in the market. The due to this pandemic era, there is no such face to face interaction and the government supports the retailers for developing their ecommerce activities in the market. More trade and investment is required and in this context also, the UK government provides a scope to the small and medium sized business to run their operations individually with cooperate and communication. Encouraging the business activities and negotiation of the free trade are the major steps of the UK government to enhance economic growth and social development (Gov.UK., 2020b). During corona virus, the UK government is also successful to paying your employees is the scheme which is considered as corona virus job retention scheme, in which the leader of the corporate firms provide salary to the employees, so that they can fulfil their basic needs during this critical era. It is one of the effective ways, where the government took the initiative to provide payment to the employees for supporting them financially.

Government schemes

Applying for a kick start scheme grant is also another policy where there is job placement to support the social communities during these hard times. Ensuring sick pay is also effective strategy to support the employees, where providing the payments for sickness and diseases through monetary rewards or insurance is beneficial for the social communities to fight against corona virus (The Guardian, 2020). The government also focuses on increasing the rate of relief fund during this crisis, where the successful business leaders are contributing efficiently to support the social communities for better management and practice in the society. There is social development planning by investing in the society for protecting the communities and fight against corona virus. NHS is also doing a great job, where government is collaborating for providing high quality health care services to all the individuals. The policy of equality and diversity as well as managing transparency and accountability are effective for NHS to provide quality health care services to support the patient with corona positive (Staff, 2020).

Economic policies

There are also economic policies and practice in the UK economy for tackling the crisis, and in this regard the banking institution and Bank of England are collaborating to support the social communities. They cut the interest rate to 0.1% for the business loan to support the small and medium sized business entrepreneurs so that they can start theory own business to live a normal life. Funding to the SMEs and decreasing the interest rate on loan are the effective economic programs to support the social communities during this pandemic era (Bank of England, 2020). Financial facility for the employees and suppliers in the market is also another policy which secures the income generation of the employee, so that they can survive and fight against corona. The government also support the retailers to set affordable price for their products which are necessities of the social communities during this pandemic, such as daily necessities at home, cleaning products, health related goods, masks, sanitizer, gloves, food items and grocery, which are mandatory for the individuals to survive (Forbes, 2020).

The price rate of the retail products is managed well with government subsidy which is beneficial for the individuals in the UK to afford the products and fulfil their basic needs. Eat Out to Help Out scheme is another policy of the UK government, where the individuals need to provide 50% off the bill for eating food and drink up to 10 pounds per person, so that country’s spending can be maintained and this food subsidy will be helpful for the individuals to eat as per their preferences and pay less. Tax cut through providing subsidy, public health care service through NHS and increasing government spending are also the policy implications in the UK through which the government would like to tackle the hard time during this recent pandemic era to support the social communities of the UK (BBC News, 2020).

Conclusion

This pandemic era of COVID 19, affects the retail sales volume and profitability of the retailers in the UK. As it is a major contributing industry in the UK, the government take too many initiatives to support the retailers as well as provide suitable opportunity to the individuals to fulfil their needs and preferences. As per the demand and supply analysis, the demand for the necessary goods in daily life is increasing in this recent pandemic situation and on the other hand, the supply of medicines hand sanitizer, gloves, medicines and grocery item are also increasing to support the invidiously to live a normal life and survive in such critical era. The UK government works with NHS and Bank of England to take fiscal policy of tax cut and increasing subsidy for supporting the individuals in the country.

Reference list

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