Managerial Economics 2 Marks:

Any doubt, then call: 9042989895

Your guidance senior

1. Define Managerial Economics:

Ans, Managerial economics is the application of economic theory and
methodology to business decision-making, focusing on how managers can use
economic principles to optimize their strategies.

2. What is the Incremental Concept?

Ans, The incremental concept refers to the analysis of the additional or marginal
costs and benefits associated with a decision, helping managers evaluate the
impact of small changes.

3. Define Elasticity of Demand:

Ans, Elasticity of demand measures the responsiveness of quantity demanded
to changes in price or other factors. It is calculated as the percentage change in
quantity demanded divided by the percentage change in price.
4. What is Consumer Equilibrium?
Ans, Consumer equilibrium occurs when a consumer maximizes utility given
their budget constraint, achieving the highest satisfaction from their purchases.

5. What is the Law of Variable Proportions?

Ans, This law states that as one input is varied while others remain constant, the
output will initially increase, reach a maximum, and then eventually decline.
6. Define Isoquants:
Ans, Isoquants are curves that represent different combinations of inputs that
produce the same level of output, similar to indifference curves in consumer
theory.
7.Define Gross Domestic Product (GDP):
Ans, GDP is the total monetary value of all finished goods and services produced
within a country's borders in a specific time period.
8. What is Business Cycle?*
Ans, The business cycle refers to the fluctuations in economic activity
characterized by periods of expansion and contraction in GDP.
9.What is Monetary Policy?
Ans, Monetary policy involves controlling the money supply and interest rates
by a country's central bank to achieve macroeconomic objectives like controlling
inflation and stabilizing currency.
10.Define Inflation:
Ans, Inflation is the rate at which the general level of prices for goods and
services rises, eroding purchasing power.

11. What is Decision Science?

Ans: Decision Science is the collection of quantitative techniques used to inform

decision-making at the individual and population levels.
12. Write the meaning of economic gain.
Ans: Economic gain is the money earned after taking explicit and implicit costs
into account.It is the financial amount that remains after subtracting both
explicit costs and opportunity costs from revenue.
13. Why sales forecasting is most passive?
Ans:Passive forecasting is the simplest type. Sales data is used from the past to
predict the future. You should use data from the same season to project sales in
the future, so you compare apples to apples. This is particularly true if your
business has seasonal fluctuations.
14. State the uses of Input Output analysis.
Ans:1. Used to estimate the impacts of positive or negative economic shocks . 2.
Analyses the ripple effects throughout the economy.
15. Bring out the three stages of law of variable proportions.
Ans:
- First stage or stage of increasing returns.
-Second stage or stage of diminishing returns.
-Third stage or stage of negative returns.
16. Write short notes on Monopolistic Competition.
Ans: Monopolistic competition is when many firms are competing to sell similar
but differentiated products. One example of monopolistic competition in the
mobile phone industry is Samsung, Xiaomi, and OnePlus. These companies
produce similar products, such as smartphones and accessories, with unique
features that differentiate them.
17. Why is GDP important in economics?
Ans: Yes, GDP is important because it gives information about the size of the
economy and how an economy is performing
18. Define “Cost Plus Pricing”.
Ans: Cost-plus pricing is a basic pricing strategy that involves determining the
cost of goods or services, and then adding a fixed percentage (the margin) as the
markup.
19. Write the meaning of the term ‘Trough’ in Business Cycle. Ans: A trough in
the business cycle is a period of negative gross domestic product (GDP) that
forms the lowest point in an economic cycle. It indicates that a recession is
underway
20. When money market equilibrium occurs?
Ans: Money market equilibrium occurs at the interest rate at which the quantity
of money demanded equals the quantity of money supplied
21. Write the meaning of ‘Disinflation’.
Ans: Deflation is a general drop in price levels in an economy.Deflation is harmful
to an economy because it can cause a spiral of reduced economic activity.

22. What money market means?

Ans: Money is defined as “a current medium of exchange”. The money market is
a name given to the various firms and institutions that deal in the various grades
of near money

23.Brief the application of Managerial Economics.

Ans: 1.Helps in choosing the production technique to be employed in the
production of a given product. 2. Helps to make decision relating to the level of
inventory of a product or raw material a firm will maintain.
24. Write the facet of Micro Economics.
Ans: 1.Studies about limitedness. 2.Does not affect the whole economy. 3.It is
useful for resource allocation and policy formulation 4.Helps in economic
analysis of an individual.
25. What is Point-Price Elasticity?
Ans: It is the measure of responsiveness of the price of a product to changes in
the quantity demanded or supplied at a particular point on the demand or
supply curve. 4. State the purpose of demand forecasting. 1.Helps in adjusting
price strategies. 2.Identifies market opportunities. 3.Management of supply
chain risk. 4.Helps in calculating the feasibility.
26. Name the function that gives technological relation between quantities of
physical inputs and outputs.
Ans: Production function
27. What is Duopoly?
Ans: Duopoly is when there are only two sellers in the market. It is a market
structure where the industry is only dominated into large producers.
28. Write a note on Iso cost line.
Ans: Iso cost line is a curve which shows various combinations of inputs that cost
the same total amount.

29. What is an example of perfect competition?

Ans: 1.An agricultural market made up of thousands of farmers, making the
market efficient. 2. An auction where numerous people bid on the same product.
30. List out Macro economic variables.
Ans: 1.GDP. 4.Public expenditures 2.Overall taxes 5.Aggregated price levels
3.Savings and investment 6.Balance of payments
31. What do you understand by nominal GDP?
Ans: It measures the economic production at current market prices, it is the GDP
given in current prices without adjustment for inflation.
32. What is Foreign Capital?
Ans: It is the inflow of capital into the home country from international countries.
33. How does commodity market works?
Ans: The dynamics of supply and demand serve as the fundamental governing
principles of the commodity market.
34. Micro economics- It is the branch of economics that examines the
functioning of individual industries and behaviour of individual decision making
units(i.e)Business firms and households.
35. Incremental concept-It is the most important concept in
economics.Incremental principle is applied to business decisions which involves
a large increase in total cost and total revenue.Incremental cost is the change in
total cost as a result of change in the level of output.
36.Demand curve - It is a line graph utilised in economics,that shows how many
units of a good or service will be purchased at various prices.
37.Consumer behaviour - It refers to how individuals make decisions and take
actions when acquiring and using products or services.
38.Imperfect competion- Imperfect or monopolistic competition is,where the
conditions of perfect competition do not hold, “Imperfect competition” will
exist.It has large number of firms in the industry with few barriers to entry and
exit.
39.Economies of scale-The term economies means advantage and scale denotes
large scale production.The term economies of scale denotes advantage of large
scale production. (or) Large scale production provides several advantages to the
industry in technical languages,these benefits are called economies of scale.
40.Monopoly- Pure monopoly is where only one producer of a firm exists in the
industry and dominates the market.
41. Business cycle-The alternating periods of expansion and contraction in the
economic activity is called business cycle or trade cycles.
42. Business indicators-They are key stats about the economy that can help
investors decide when to buy or sell investments.(e.g) If stock market is at it’s
peak,you may want to buy or sell.
43. Deflation- It is the reverse of inflation.It refers to a sustained decline in the
price level of goods and services.
44. Fiscal policy-Fiscal policy is the use of government expenditure and revenue
collection to influence the economy.
45. Cashless economy-All the transactions carried out between two individuals
will occur by payment through payment gateways or plastic money.
46. What is analytical problem solving?
Ans: Analytical problem solving is a process of applying logical thinking, data
analysis, and creativity to solve problems effectively and efficiently.
47. Define the term “Opportunity Cost”.
Ans: Opportunity cost represents the potential benefits that a business, an
investor, or an individual consumer misses out on when choosing one alternative
over another.
48. Write the meaning of “Competitive Demand”.
Ans: Competitive demand refers to the demand for a good or service when there
are many available substitutes. Competitive Demand exists when there are
alternative products available. Competitive demand helps consumers to choose
an alternative product if one product hard to procure.

49. When Consumer Equilibrium Occurs?

Ans: Consumer's equilibrium occurs when MRS is equal to the ratio of the price
of x commodity and price of y commodity. MRS= PX/PY.
50. What is “Economic Rent”?
Ans: Economic rent is defined as the amount a business receives above the
expected value.It is the earned income one receives above the actual price.
51. Write short note on Duopoly Market Structure.
Ans:A duopoly is a market structure in which there are only two firms or sellers.
In a duopoly, each firm has some control over the price of the goods or services
they offer, because the other firm is the only other option for consumers.
52. State the equilibrium relation between Income, Savings and National
Income.
Ans: The Saving-Investment Approach states that when the planned saving (S) is
equal to the planned investment (I), the equilibrium level of income in an
economy is established.
53. List out the key macro economic variables.
Ans: Balance of Payments, Inflation, Economic Growth,Unemployment
54. What is Hyper Inflation?
Ans: It is a very high stage of inflation, where the prices of all goods and services
rise uncontrollably over a defined time period.
55. Write the functions of Money Market. Ans: Provides funds, central bank
policies, helps government, helps financial mobility, promotes liquidity and
safety, economy in use of cash.
56. What is Contractionary Fiscal Policy?
Ans: A contractionary policy is a monetary measure to reduce government
spending or the rate of monetary expansion by a central bank. It is a
macroeconomic tool used to combat rising inflation.
57. Mention the Causes of Deflation - Decrease in the money supply, Decline in
consumer demand, and Increase in business productivity
58. What do you mean by incremental reasoning?
Ans: It states that a decision is profitable if revenue increases more than cost. It
involves estimating the impact of decision alternatives on costs & revenues.
59. Brief the concept of discounting.
Ans: It is the process of determining the present value of a payment or a stream
of payments that is to be received in the future.
60. State the importance of capital goods.
Ans: 1. Improves productivity- Producing goods manually is a complex & time
consuming process. 2.More rewarding- With the right capital goods, business
can yield a high return on investment. 3.Acts as a reliable economic indicator-
Capital goods are considered an excellent indicator of the economy.
61. Mention the assumptions of consumer behaviour.
Ans: 1.Consumers have complete information. 2.Consumers can rank order their
preferences. 3.Consumers act to maximise (utility, profit, & output) is rational.
62. Define ‘Production function’.
Ans: It is a concept of economics that explains the relationship between physical
input & output.
63. List out the stages of law of variable proportions.
Ans: 1.First stage or stage of increasing returns. 2.Second stage or stage of
diminishing returns. 3.Third stage or stage of negative returns.
64. What is cost concept? Ans: It refers to the amount of payment mode to
acquire any goods & services.
65. Mention the types of imperfect markets.
Ans: 1.Monopoly market. 3.Monopsony market 2.Oligopoly market
4.Monopolistic market
66. Is NNP and national income same? Ans: No.National income includes all
incomes earned (profits, rent, wages & profit income). NNP is GNP depreciation.
67. What is included in National Income.
Ans: Rent, wage, profit & interest.
68. What shifts the money supply curve?
Ans: The fed controls the money supply & there are three main tools. 1.Reserve
requirement ratio 3. Discount rate 2.Open market operations
69. List out the indicators of economics health?
Ans: GDP growth, balance of trade, interest rates, currency strength, consumer
price index, unemployment, stock market, crude oil prices
70. Brief about prescriptive marginalism.
Ans:Marginalism is a theory that asserts individuals to make decisions on the
purchase of an additional unit of a good or service based on the additional utility
they will receive from it.Prescriptive marginalism gives directions in making the
purchase.
71.What do you mean by econometric correlations?
Ans: In economics, the analytical relationship between two units is called
correlation.(eg) The more money you earn the more taxes you pay.Better
education guarantees a better salary.
72.Define the term ‘Cross elasticity of demand’.
Ans: It is an economic concept that measures the responsiveness in the quantity
demanded of one good when the price for another good changes.
73.State the limitation of utility analysis.
Ans: 1.Utility cannot be measured cardinally. 2.Does not study income effect,
substitution effect and price effect. 3.Consumer isn’t of calculating mind. 4.Single
commodity mode is unrealistic. 5.Human beings cannot be so rational.
74.What is empirical production function?
Ans: It is the mathematical form of the production function to be estimated.
75.State the assumptions of law of variable proportions.
Ans: 1.All units of variable factors are homogeneous 2.Only one factor is variable
while others are held constant. 3.There is no change in technology. 4.Products
are measured in physical units.(ie)Quintals, tonnes, etc,.
76.List out the classifications of cost concept.
Ans: 1.By nature of elements. 2. Only one factor is variable, while others are held
constant 3. There is no change in technology. 4. Products are measured in
physical units.(ie) Quintiles, tonnes,etc,.
77. Give some examples of monopolistic competition.
Ans: Restaurants, hair salons, household items and clothing.
78.How NNP is different from GNP?
Ans: GNP. NNP 1.It is the market value of all products. 1. It is the value of GNP
after & services produced in a country. deducting depreciation of plant &
machinery. 2.Gross national product. 2.Net national product.
79.Is savings part of GDP?
Ans:Yes, today’s savings translates into tomorrow’s GDP through a capital output
ratio.
80. Mention the instruments of Money market.
Ans:Government bonds, banker’s acceptance, treasury bills, repurchase
agreements, commercial paper, certificates of deposit.
81.Brief the factors affecting the supply of money.
Ans: 1. Central bank policy- When it injects money into the economy, it increases
money supply, conversely when it sells securities, it reduces the money supply.
2. Fiscal policy- When the government raises taxes to influence the economy, it
reduces the amount of money available to individuals & businesses, leading to a
decrease in money supply. 3.Economic Growth- When economy is growing,
there is an increase in the demand for money, as business & individuals need
more money, which can in turn affect the money supply