B.Com/BBA Micro Economics Dec 2024

Description

Micro Economics

December 2024 Examination

 

 

1. As the marketing manager for a well-known brand of headphones, your company has recently decided to raise the price of these headphones due to increasing production costs. How do you anticipate this price increase will affect the demand for the headphones? Discuss the role of price as a critical factor influencing demand. Additionally, analyse the given scenario and present your observation: i) If the demand for your headphones is elastic. ii) If the demand for your headphones is inelastic. (10 Marks)

Ans 1.

Introduction

As the marketing manager of a well-known brand of headphones, the decision to raise prices in response to increasing production costs poses significant implications for consumer demand. Price is a fundamental factor influencing demand, as it affects consumer behavior and purchasing decisions. The relationship between price and demand can be understood through the concepts of elastic and inelastic demand. Elastic demand indicates that consumers are sensitive to price changes, leading to substantial changes in quantity demanded, while inelastic demand suggests that consumers are less responsive to price changes. This analysis aims to explore the potential outcomes of a

 

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2. Sachin, a college student, has been studying all day and feels very hungry. He decides to have a snack and starts eating apples. After consuming the first apple, Sachin feels a great sense of satisfaction and his hunger is somewhat alleviated. As he eats the second apple, he still enjoys it, but not as much as the first. By the time he reaches the fourth apple, his hunger is significantly reduced, and the satisfaction he derives from each additional apple is noticeably lower. Eventually, Sachin reaches a point were eating a fifth apple provides him with no additional satisfaction, and any further consumption of apples starts to make him feel uncomfortable. Based on the above scenario highlight which law is stated and how does this law manifest in Sachin’s consumption pattern. (10 Marks)

Ans 2.

Introduction

The scenario involving Sachin’s consumption of apples demonstrates a fundamental concept in microeconomics known as the Law of Diminishing Marginal Utility. This law explains how the satisfaction or utility derived from consuming additional units of a good or service decreases with each subsequent unit consumed. Initially, when Sachin eats the first apple, his hunger is at its peak, and the satisfaction he gains from the apple is high. However, as he continues to eat more apples, the satisfaction from each additional apple diminishes until it reaches zero, and further consumption leads to discomfort. This principle is crucial in understanding consumer behavior and decision-making, particularly when it comes to determining how much of a product to

 

3a. Production manager for a new manufacturing company that is setting up a factory to produce high-end electronics. Your company is currently in the planning phase and needs to make critical decisions about the resources required for production. You have identified several key inputs for the production process. Identify and explain the fixed and variable factors of production in the scenario provided. How do each of these factors impact the production process and decision-making for the company?     (5 Marks)

Ans 3a.

Introduction

As the production manager for a new manufacturing company specializing in high-end electronics, the planning phase involves making critical decisions regarding the resources needed for efficient production. Identifying and categorizing the factors of production into fixed and variable inputs is essential for optimizing costs, resource allocation, and scaling operations. Fixed factors are those that remain constant regardless of production levels, while variable factors change with the level of output. Understanding the distinction between these factors and their

 

 

1. From the given table, enumerate the term “marginal utility” and calculate marginal utility from the given table.

Unit Consumed	Total Utility	Marginal Utility
0	0
1	10
2	18
3	24
4	28
5	30

 

 (5 Marks)

Ans 3b.

Introduction

Marginal utility is a key concept in microeconomics that refers to the additional satisfaction or utility gained from consuming one more unit of a good or service. It helps explain how consumer satisfaction changes as they consume more of a particular product. Understanding marginal utility is essential for determining optimal consumption levels, as it helps to identify the point where consuming more of a good no longer adds value. In this task, we will define marginal utility and calculate