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E1

Solution of the Paper MBA SEM 1 Economics

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a2gamer020
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9 views5 pages

E1

Solution of the Paper MBA SEM 1 Economics

Uploaded by

a2gamer020
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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E

Here are simplified and elaborated


answers to the questions in your
paper, structured according to Pune
University’s guidelines. I have followed
the pattern of the 2-mark, 5-mark, and
10-mark questions as mentioned.

2-Mark Questions (Answer any 5)


1. Define Macro Economics
Macro Economics is the branch of
economics that deals with the
economy as a whole. It studies
aggregate factors like national income,
overall employment, inflation, and
government policies.
2. Explain Sunk Cost
A sunk cost refers to money that has
already been spent and cannot be
recovered, such as investment in
obsolete technology.
3. Features of Monopolistic
Competition
• Many sellers selling similar
but differentiated products.
• Freedom of entry and exit in
the market.
• Heavy reliance on
advertising and branding.
4. Formula for Cross Elasticity
of Demand

Where is the quantity demanded of


one good and is the price of another
related good.
5. Any Two Determinants of
Supply
• Price of the good.
• Technology used in
production.
6. Define Cyclical Pricing
Cyclical pricing adjusts prices based
on the economic cycle, such as
lowering prices during a downturn or
recession.
7. Formula for Multiplier Effect

Where is the Marginal Propensity to


Consume.
8. True/False Statement
False: In the Laws of Variable
Proportions, Stage III is when marginal
product becomes negative, not where
average product cuts marginal
product.

5-Mark Questions (Answer any 2)


1. Define Profit Maximization
Model
• Profit Maximization is the
goal of a business to achieve the
highest possible profit by balancing
revenue and costs.
• Profit is calculated as:

• It assumes firms are rational


and operate efficiently.
• The model identifies the
output level where Marginal Revenue
(MR) = Marginal Cost (MC).
• This is essential for long-
term growth and survival.
2. Good Demand Forecasting
Criteria
• Accuracy: Should closely
match actual demand.
• Simplicity: Easy to use and
understand.
• Cost-effectiveness: Should
not be overly expensive.
• Flexibility: Adaptable to
changing trends.
• Based on data: Uses
historical data and market trends.
Good demand forecasting helps
businesses optimize inventory and
production planning.
3. Features of Indifference
Curve
• Downward sloping: Indicates
that as one good’s consumption
increases, the other must decrease to
maintain the same satisfaction.
• Convex shape: Due to the
diminishing marginal rate of
substitution (MRS).
• Non-intersecting: Two
curves cannot cross as it would violate
consistency.
• Higher curves represent
greater satisfaction: Reflects higher
consumption bundles.

10-Mark Questions (Answer any 2)


1. Law of Demand with
Schedule and Graph
• Definition: The law of
demand states that, other factors
being constant, the quantity
demanded of a good decreases as its
price increases.
• Explanation: This is due to
the income and substitution effects.
• Schedule:

Price (₹) Quantity Demanded


10 100
8 150
6 200

• Graph: The demand curve


slopes downward from left to right,
showing an inverse relationship
between price and quantity
demanded.
Diagram is necessary for full marks.
Draw a clear demand curve with
labeled axes.

2. Price Determination Under


Monopoly (Long Run)
• In monopoly, price is set by
the monopolist, who controls both
supply and price due to lack of
competition.
• The monopolist produces
output where Marginal Cost (MC) =
Marginal Revenue (MR) to maximize
profit.
• The price is then determined
based on the demand curve at this
output level.
• Graph: Include MC, MR, and
demand curves, and show equilibrium
at MC=MR.
• In the long run, monopolists
can earn supernormal profits if
demand remains high and costs are
controlled.
3. Methods of Government
Intervention
• Price Controls: Setting
maximum (price ceiling) or minimum
(price floor) prices to protect
consumers and producers.
• Subsidies: Financial
assistance to producers or consumers
to encourage production or
consumption.
• Taxation: Imposing taxes to
reduce harmful practices or generate
revenue.
• Public Goods: Direct
provision of goods like roads and
education by the government.
• Regulation: Enforcing rules
to maintain competition and prevent
monopolies.
4. Measures to Control
Business Cycle
• Fiscal Policy: Use of
government spending and taxation to
manage economic activity.
• Monetary Policy: Adjusting
interest rates and money supply to
influence demand.
• Public Works: Launching
infrastructure projects during a
recession to create jobs.
• Automatic Stabilizers:
Mechanisms like unemployment
benefits to stabilize income during
economic fluctuations.
• Export-Import Measures:
Using trade policies to balance the
economy during downturns.

Let me know if you need more


elaboration or diagrams!

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