BBA/B.Com Micro Economics

Description

Micro Economics

Dec 2024 Examination

 

 

PLEASE NOTE:  This assignment is application based, you have to apply what you have learnt in this subject into real life scenario. You will find most of the information through internet search and the remaining from your common sense. None of the answers appear directly in the textbook chapters but are based on the content in the chapter

Q1. Imagine you are part of a research team analysing the necessity of government intervention in various economic systems. You have been asked to evaluate three different economies and analyse how the level of government intervention affects economic efficiency and overall welfare in each system, highlighting the various potential benefits and drawbacks of government involvement? (10 Marks)

Ans 1.

Introduction

Government intervention in economic systems is a subject of ongoing debate among policymakers, economists, and citizens. Economic systems vary widely, from highly centralized command economies to minimally regulated free-market systems. Each system requires varying levels of government involvement to address challenges such as resource allocation, income distribution, and market failures. While proponents of government intervention argue that it promotes social welfare and economic stability, critics contend that excessive involvement can hinder efficiency and stifle innovation. This essay examines the role of government intervention in three distinct economic systems: a command economy, a mixed economy, and a free-market economy. By analyzing the impact of intervention on economic efficiency and welfare in

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Q2(A) The country of Ecotopia has recently implemented policies aimed at promoting environmentally friendly technologies. In particular, the government has introduced a subsidy program for electric vehicles (EVs), providing significant tax breaks and rebates for consumers who purchase these cars. Identify and explain your observation as how Government policies (Subsidies and Tax Rebates), Technological advancement and Increased gasoline prices can shift the demand curve. Specify clearly if the shift will be rightward or a leftward shift. (5 Marks)

Ans 2A.

Introduction

Government policies, technological advancements, and market conditions significantly influence consumer behavior and demand patterns. In the case of Ecotopia, the government’s subsidy program for electric vehicles (EVs), combined with advancements in EV technology and rising gasoline prices, has created an environment conducive to increased EV adoption. These factors directly impact the demand curve for EVs, causing observable shifts that reflect changing consumer preferences and market dynamics. This analysis explores how each factor influences the

 

 

Q2(B) Imagine you are observing different scenarios in daily life where the satisfaction or enjoyment from consuming more of the same product gradually decreases. Identify at least three such examples that illustrate the law of diminishing marginal utility. Additionally, consider whether there might be any cases where this principle does not apply. Reflect on these exceptions, providing examples to support your view.  (5 Marks)

Ans 2B.

Introduction

The law of diminishing marginal utility is a fundamental economic principle that states the additional satisfaction or utility gained from consuming successive units of a product decreases as consumption increases. This concept is observable in everyday life and influences consumer behavior, pricing strategies, and resource allocation. While this principle generally holds true, there are exceptions where marginal utility does not diminish as expected. This discussion explores three examples of diminishing marginal utility and reflects on