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Micro Economics and Macro Economics
Jun 2026 Examination
Q1.
A premium electric scooter company, EcoRide Motors, has been operating
successfully in a metropolitan city. Over the last six months, the company has
observed a significant increase in demand for its scooters, even though the
price of the scooter has remained unchanged. The following developments have
taken place in the market: The government has announced higher fuel prices and
reduced subsidies on petrol vehicles. Consumer income levels have increased due
to salary hikes in the IT sector. The government has introduced tax incentives
for electric vehicle buyers. There has been growing environmental awareness
among consumers. The price of public transport passes has increased. A reputed
automobile brand has launched a cheaper substitute electric scooter. Despite no
change in EcoRide's product price, sales volume has increased noticeably. Using
demand theory, evaluate how each of the above factors would individually affect
the demand for EcoRide scooters. Clearly identify which factors would cause a
rightward shift and which would cause a leftward shift of the demand curve, and
distinguish clearly between a movement along the demand curve and a shift of
the demand curve in this context. (10 Marks)
Ans
1.
Introduction
Demand theory distinguishes two types of changes in
quantity demanded. A movement along the demand curve happens only when the
product's own price changes, causing buyers to buy more or less of the same
product at the new price. A shift of the demand curve happens when any
non-price factor changes, increasing or decreasing demand at every price level
simultaneously. A rightward shift means demand increased and a leftward shift
means demand decreased. Since EcoRide's own price has remained completely
unchanged over six months, all six market developments qualify
Q2
(A). A domestic airline reduces the ticket price for a popular route from Rs.
5,000 to Rs. 4,000. As a result, the number of passengers increases from 10,000
per month to 13,000 per month. The management wants to understand whether the
price cut improved total revenue and whether similar pricing strategies should
be adopted on other routes. Compute the price elasticity of demand. Based on
your result determine whether demand is elastic, inelastic, or unitary elastic.
(5 Marks)
Ans 2(A).
Introduction and Theory
Price Elasticity of Demand refers to the responsiveness
of quantity demanded to a change in price. It is a crucial concept in
managerial economics as it helps firms understand consumer behaviour and make
informed pricing decisions. In industries such as aviation, where demand
fluctuates based on pricing, elasticity plays a key role in determining optimal
ticket prices.
Concept
and
Q2
(B). A multinational telecom company is entering a new international market
where there is no historical sales data for its smartphones. Due to high
uncertainty regarding consumer preferences, pricing sensitivity, and
competitive response, the marketing director proposes using the Delphi
technique to forecast initial demand for inventory planning and promotional
campaigns. Evaluate the suitability of the Delphi technique in this context and
explain how this technique works. Illustrate with a relevant example of how
telecom experts' opinions could be used to estimate demand. (5 Marks)
Ans
2(B).
Introduction
and Theory
Demand
forecasting is a critical activity for firms entering a new market, especially
when there is no historical sales data available. In such uncertain
environments, traditional quantitative methods become unreliable as they depend
on past trends. The Delphi technique is a qualitative forecasting method
designed to handle such situations by relying on structured expert judgment
rather than numerical data.
Concept
and Application
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