The quantity that a consumer plans to buy depends upon all of the following EXCEPT I. Income of the consumer ii. Price of the Product iii. Future Expectation of Price iv. Technology. Suppose wage of labour of a firm rise. What would happen to the equilibrium price and equilibrium quantity for the firm's output?
The quantity that a consumer plans to buy depends upon all of the following EXCEPT I. Income of the consumer ii. Price of the Product iii. Future Expectation of Price iv. Technology. Suppose wage of labour of a firm rise. What would happen to the equilibrium price and equilibrium quantity for the firm's output?
The quantity that a consumer plans to buy depends upon all of the following EXCEPT I. Income of the consumer ii. Price of the Product iii. Future Expectation of Price iv. Technology. Suppose wage of labour of a firm rise. What would happen to the equilibrium price and equilibrium quantity for the firm's output?
Time: Total Marks: 70 [Note: The Question Paper has five Questions of 14 marks each. It is compulsory to attempt all the questions.]
Q.1. Answer all the following multiple choice questions: (14 marks)
1. The quantity that a consumer plans to buy depends upon all of the following EXCEPT i. Income of the Consumer ii. Price of the Product iii. Future Expectation of Price iv. Technology 2. Suppose wage of labour of a firm rise. What would happen to the equilibrium price and equilibrium quantity for the firms output? i. Price Increases; Quantity Decreases ii. Price Decreases; Quantity Increases iii. Price Decreases; Quantity Increases iv. Price Increases; Quantity Increases 3. A good or service for which an increase in income causes customers to demand more of the good, holding all other variables in the generalised function constant are called i. Inferior Goods ii. Normal Goods iii. Substitute iv. Complements 4. A Perfectly Competitive firm can sell all the outputs it wants to: i. By cutting down supply of output ii. By lowering the price it charges for each additional unit produced iii. By lowering its cost of production iv. Without lowering the price 5. A profit maximizing monopolist produces a quantity corresponding to: i. MR=MC ii. P=MC iii. P=MR iv. P=AR=MR=MC 6. Real GDP is measured i. At constant Price ii. At Current Price iii. At Market Price iv. At Wholesale Price 7. Consumer Price Index differs from GDP deflator for i. CPI takes account of all goods and services purchased by consumers whereas GDP deflator considers domestically produced goods only ii. CPI is calculated at market price whereas GDP deflator is calculated at factor cost iii. CPI shows trends in inflation whereas GDP deflator shows trend in deflation iv. CPI is calculated by asking consumers preference whereas GDP deflator is calculated by asking Producers preference 8. Following are the tools used by RBI for money control EXCEPT i. Open Market Operations ii. Reserve requirement iii. The Discount Rate iv. Deficit finance 9. Many years ago Janaki paid Rs. 500 to put together record collection of Nazia Hussein. Today she sold her collection at Sunday Gujari Market for Rs. 100. How does this sale affect current GDP? 10. Why per capita income goes up if a chicken a born whereas it falls if a child is born? 11. Is the slope of the demand curve for monopolistic competition is flatter than that of a monopoly firm? 12. When an economy is experiencing both stagnation and inflation, what is such an event called? Show it diagrammatically. 13. Explain the concept of Sunk Cost. 14. Explain the difference between nominal and real exchange rate.
Q.2 (a) Explain the Following with Appropriate Example (7 Marks)
Q.2 (b) Define the price elasticity of demand. Explain important determinant of price elasticity of demand. If demand is unit elastic, how will a decline in price affect total revenue? (7 Marks)
OR Q.2 (b) How and why does a firms average-total-cost curve differ in the short run and in the long run? Explain economies of scale and diseconomies of scale.(7 Marks)
Q.3 (a) What is meant by Perfect Competition? Under what conditions will a firm shut down temporarily? Explain with help of appropriate diagram. (7 Marks) Q.3 (b)Consider the following table of long-run total cost for three different firms: Quantity 1 2 3 4 5 6 7 Firm A 60 70 80 90 100 110 120 Firm B 11 24 39 56 75 96 119 Firm C 21 34 49 66 85 106 129 Does each of these firms experience economies of scale or diseconomies of scale?
OR Q.3 (a)What is the prisoners dilemma, and what does it have to do with oligopoly? (7 Marks) Q.3 (b)Suppose there is a sudden increase in preference for chocolates. But the cost of production rises due to rise in the price of milk. Use demand and supply model, to determine what happens to the equilibrium price and quantity in this case. (7Marks)
Q.4 (a)Draw a circular flow of income diagram representing the interaction between households and firms in a simple economy. Explain briefly various parts of the diagram. (7 Marks) Q.4 (b) The data on tea demand and tea price in India for two years were as follows:
The Comment of a prominent politician on this data is as follows: This clearly shows that the law of demand is not operating in the Indian Sugar market. The price went up yet consumers bought more. We can not rely on outdated economic concepts from the previous century for an analysis of current problems.
Do you agree with this observation? How would you interpret the above given data? OR
Q. 4 (a)How the Phillips curve is related to the model of aggregate demand and aggregate supply(7 Marks) Q.4 (b)In the year 2005, the economy produces 100 liters of milk that sell for Rs. 18 each. In the year 2006, the economy the economy produces 200 liters of milk that sell for Rs. 20 each. Calculate nominal GDP, real GDP and the GDP deflator for each year. (Use 2005 as the base year) By what percentage does each of these three statistics rise from one year to the next? (7Marks)
Q.5 Case Study (14 Marks) MBA syllabus of Gujarat Technological University recommends two books for Managerial Economics studies. These are the books by Gregory Mankiw and Samuelson &Nordhaus. Mankiws book is priced at Rs. 140 while Samuelson &Nordhauss book costs Rs. 115. Both the books are readily available in the market and the publishers ensure that these are never stocked out. Mankiws book sells more than that by Samuelson &Nordhaus and their publisher tried at least to have parity with the sale of Mankiws book. Many financial incentives provided by the publisher proved to be of a little use and the two books continued to maintain a long term ratio of 10:9, though there were temporary marginal variations in the ratio. Samuelson &Nordhaus were persuaded by thr publishers to revise and enlarge their book. The publishers gave Samuelson &Nordhaus the examination papers and syllabus of 15 universities across the length and breadth of the country. The aim was to ensure that the coverage of the subject was improved and emphasis was placed on the topics which often appear in the examinations. Samuelson &Nordhaus spent 11 months for revising the book and the publishers ensured that specimen/ complimentary copies of the revised enlarged edition were in the hands of all the concerned faculty members well before the commencement of the session. The hard work of the author paid and the sales of the book improved. The sales of two competing book were equal, i.e. a parity had been achieved between the two books. This sales information brought dismay to the publishers of Mankiews books. Though Mankiw was not bothered. He did not go through his book after repeated request ofhis publishers but decided that the book needed no major changed but for a few topographical mistakes. The publishers tried price elasticity and brought down the price of Mankiws book to Rs. 11o. Consider the situation and the environment of the university as described above. What do you feel will be the reactionn to this price advantage? What are the chances of Mankiws book improving? Will the earlier ratio of 10:9 in favour of Mankiws book be achieved? Give reasons for your views. What can the publishers and Mankiw can do to bring back the advantage to enjoyed by Mankiews books over the years? OR Q.5 (a) Following table provides some of the values of cost for different level of output for an auto mobile firm. Calculate the missing values. How much should the firm produce in order to attain the maximum cost efficiency? (7 Marks) (All Values are in Rs. Crores) Output Total Cost Total Fixed Cost Total Variable Cost Average Fixed Cost Average Variable Cost Average Total Cost Marginal Cost 100 260 - 60 - - - - 200 - - - - - - 0.30 300 - - - - 0.50 - - 400 - - - - - 1.05 - 500 - - 360 - - - - 600 - - - - - - 3.00 700 - - - - 1.60 - - 800 2,040 - -- - - - -
(b).Explain whether each of the following events shifts the short run aggregate demand curve, the aggregate supply curve, both, or neither. For each event that shifts a curve, use a diagram to illustrate the effect on the economy. (7Marks) a. In the national budget there is more incentive to save, so households decide to save more. b. Entire North India suffers 50 per cent deficiency in rain fall. c. Increased job opportunities overseas cause many people to leave the country.
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