BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE, PILANI, PILANI CAMPUS ESTER - 2021-2022 SECOND SEM Course No. : CON F211 : Course Title: PRINCIPLES OF ECONOMICS Max Marks 330 Duration +90 Minutes Date 3.12/03/2022 wana ny Tnstructions: & Atquestions are compulsory. All parts ofthe questions should be answered together. * Start each question from a new page. Part A and Part B should be answered sequentially and separately, * A calculator is allowed. Pat QI: Suppose the business travelers and economy travelers have the following demand for flight tickets from Delhi 10 Mumbai. [10M) Price and Quantity demanded for Bu uantity Demanded | 1) Sousa avel) | x 750 | B 13000 1 c 16250 | D_|__19500 I a) As the price of flight tickets has increased from and economy class passengers? (Use the these two kinds of passengers? D> [What are the changes in total revenue (TR) for these two different categories of travelers with an increase in price from point B to C and from point Cto D? point B to C, what is the price elasticity demand for both the business Mid-Point elasticity formula). What is the nature of demand elasticities of Q2: Refer to the information provi. Jed in the given table (for Arohi), answer the following questions: N {sy wer it accordingly ‘reams chocolates Marginat | oe | ins ul | _rupees | i NS 4 ears teaeas ae 5 a) Given the information, compute the total utility of the fifth chocol utility of chocolates and ice cream from 1" to 4" unit for Arohi b) IF the price of one chocolate is @ 15, the price of ice cream is 2 20 equation for Arohi, given she splits her income equally between ehy ©) Given the information, the price of chocolates as utility per rupees for both the goods. 4) Suppose Arohi’s income has doubled to & 360, after the change Arohi spends & 60 on Chocolates and 2 300 on lee ream. What will be the new budget equation for her? Explain which good is normal or an inferior good for her? ates and ice-creams. Also, calculate the marginal and Arohi has 2 180 of income, write the budget jovolates and ice cream, 215 and the price of ice cream as 220, compute Arohi’s marginal Page 1 of 2 P.T.O.(Q3: Consider the market for Sandwich, where the market demand and market supply foe Sandmich pve Qd=150-5P Qu-SP-50 ‘Where P is reflected as the price per Sandwich. Given this information, avswer the folloning questions 8) How many Sandwiches would be sold at what price at equilibrium? d) ‘What would happen if the price of Sandwich is set at 2 30, will there be a shortage surplus” ©) Suppose the price of Burger, which is a substitute for Sandhwich has doubled, this leads to 2 doubling th Sandwich. In other words. at each price, the consumer will demand twice a8 much Sands SE eT Soation for the market demand for Sandwich. Estimate the new equilibrium price and qaartty $a Q4: Assume a perfectly competitive firm operating in the shor run The firm pays a market-determined for cach unit of labor hired. And further, assume that the market price of good X produced labor is % run production function of a firm is given as Q = (0.1L? + 6L? + 12L where Q indicates the ouput and L represerss ‘number of persons employed. Answer the following questions with relevant calculations: pal a) Find the value of L that maximizes A\ b) Find the value of L-and Q that maximizes MP. ©) Find the quantity of output at a minimum of AVC 4) How many units of L will be employed by the profit-maximizing firm? - - ©) Find the profit-maximizing quantity of output (Corresponding to the unit of Labour (L) as identified in part (2). Find the value of profit at that level of oxeput. QS: The industry demand curve and supply curve in a perfectly competitive market is given by the equation as: [20M] Od = 300 -10P and Qs = 10P ~100 And the total cost of a representative firm in the industry is given as: TC =50+16Q-20" +020" Answer the following questions with relevant calculations: : a) What are the market equilibrium price and quantity in the short run’ : b) Calculate the amount of profitloss of the firm at the equilibrium level of output in the short n= : ©) Comment whether the firm will continue to operate inthe short run or not giving appropriate jusiication for it ) Calculate the shutdown price and the corresponding quantity. 3B How much will the firm supply at a price of 28. ir i re the i ng it ion, draw 2 similar table in your answer sheet just as given below and comple Q6: Given the following information, a a - ‘Total ‘Total ‘Average | Average ‘Short Geansity | Short [Tot | vanabie | Fiied | Varable | Rana) Q=-O.1l's6U'+ 1a Aro OL +600 lew 3M b) MP. OM 1B od aan “The FOC for maximiaatioin of MP. ta gow, -06L +120 i -20 Value of @ (when L= 20) when MP, is maximum isQ= 1s | 4+ 4M ¢) The value of output when AVC is minimum corresponds to the output level when AP, is maximum. AP, is maximum when L= 30. And value of Q= 3060 3M 4) The profit manmizing firm will hire | til the equilibrium condition MRP, = W" (ie MRPL= (MP, x (Px) =P. (or eee cate ie enbinfied LA U24 190 191 12M = 26h