MB0042 – MANAGERIAL ECONOMICS

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Assignment

Drive	Semester 2017
Program	Master of Business Administration - MBA
Semester	1
Subject code & name	MB0042 – MANAGERIAL ECONOMICS
Book ID	B1625
Credit and Max. Marks	4 Credits , 60 Marks

Question 1. Define Law of Demand and discuss the various exceptions to the law of demand

Answer : Law of demand : The law of demand states that, all other things being equal, the quantity bought of a good or service is a function of price. As long as nothing else changes, people will buy less of something when its price rises.

·       The demand schedule tells you the exact quantity that will be purchased at any given price. Here's a real-life example of how this works in the demand schedule for beef in 2014.

·       The demand curve plots those numbers on a chart

Question 2. Explain the features of LAC curve with a diagram    

Answer : The Long Run Average Cost, LRAC, curve of a firm shows the minimum or lowest average total cost at which a firm can produce any given level of output in the long run (when all inputs are variable).

Features of LAC curve 

(i)  The LAC curve is tangential to the various SAC curves:

Question 3. Critically examine Baumol’s static and Dynamic Models

Answer : Static model is more structural than behavioral while dynamic model is a representation of the behavior of the static components of the system. Static modelling includes class diagram and object diagrams and help in depicting static constituents of the system. Dynamic modelling on the other hand consists of sequence of operations, state changes, activities, interactions and memory.

Question 4. Explain Perfect Competition and the equilibrium of a firm under perfect competition in the long run

Answer : Perfect competition describes a market structure where competition is at its greatest possible level. To make it more clear, a market which exhibits the following characteristics in its structure is said to show perfect competition:

·       Large number of buyers and sellers

·       Homogenous product is produced by every firm

·       Free entry and exit of firms

·       Zero advertising cost

·       Consumers have perfect knowledge about the market and are well aware of any changes in the market. Consumers indulge in rational decision making.

Economic Profit and Economic Loss

Economic profits and losses play a crucial role in the model of perfect competition. The existence of economic profits in a particular industry attracts new firms to the industry in the long run. As new firms enter, the supply curve shifts to the right, price falls, and

Question 5. Discuss the working of the multiplier and explain the various leakages in multiplier.

Answer : A number which indicates the magnitude of a particular macroeconomics policy measure. In other words, the multiplier attempts to quantify the additional effects of a policy beyond those that are immediately measurable.

Working of Multiplier :

Multiplier is the mechanism through which income gets propagated as a result of added investment. How a new investment brings about a multiple increase in income by

Question 6. Explain Oligopoly. Explain the features of Oligopoly market.

Answer : An oligopoly is a market form wherein a market or industry is dominated by a small number of sellers (oligopolists). Oligopolies can result from various forms of collusion which reduce competition and lead to higher prices for consumers. Oligopoly has its own market structure. The Oligopoly Market characterized by few sellers, selling the homogeneous or differentiated products. In other words, the Oligopoly market structure lies between the pure monopoly and monopolistic competition, where few sellers dominate the market and have control over the price of the product.

Homogeneous product: The firms producing the homogeneous products are called as Pure or Perfect Oligopoly. It is found in the producers of industrial products

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