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Business Economics
April 2025 Examination
Q1. XYZ Pvt. Ltd., a mid-sized
manufacturing company producing eco-friendly water bottles, has witnessed a
surge in demand due to increased environmental awareness. However, the company
faces several significant challenges in scaling up production to meet this
growing demand. Firstly, the limited availability of skilled labor poses a
constraint on expanding production capacity. Secondly, the company depends on
imported machinery, with a three- month lead time, which delays the procurement
process and hampers timely scaling efforts.
Additionally, seasonal variations
in the availability of raw materials further disrupt production schedules and
supply chain efficiency. These factors collectively restrict XYZ Pvt. Ltd.'s
ability to respond swiftly to the rising demand, despite the reduction in
production costs due to government subsidies on raw materials. As a result, the
company is assessing its capacity to increase production effectively to
capitalize on the growing eco-friendly water bottle market. Analyze the above
scenario and discuss the concept on elasticity of supply and discuss the
various determinants of elasticity of supply.
(10 Marks)
Ans
1.
Introduction
In
today’s competitive business landscape, supply-side responsiveness plays a
crucial role in determining the success of a firm. XYZ Pvt. Ltd., a mid-sized
manufacturing company producing eco-friendly water bottles, has experienced a
significant increase in demand due to rising environmental consciousness among
consumers. While this surge presents an opportunity for growth, the company
faces challenges in scaling up production. Limited availability of skilled
labor, dependence on imported machinery with long lead times, and seasonal
variations in raw material supply restrict its ability to respond efficiently
to the demand shift. Despite the
Q2. XYZ Tech Solutions is a growing
software company specializing in developing mobile applications. The company
plans to launch a new app designed to improve customer engagement for retail
businesses. Management believes that the app will attract significant interest,
but they are unsure of the future demand, especially since the market for such
applications is still evolving. To make informed decisions regarding
production, marketing, and resource allocation, XYZ Tech Solutions needs a
reliable demand forecast. To address this, XYZ Tech decides to use the Delphi
technique. On the above scenario, discuss the various factors affecting demand
forecasting and details about Delphi technique method of demand forecasting
with respect to above context. (10
Marks)
Ans
2.
Introduction
Demand
forecasting plays a crucial role in strategic planning for businesses,
especially in industries experiencing rapid technological advancements. XYZ
Tech Solutions, a growing software company specializing in mobile applications,
is preparing to launch a new app designed to improve customer engagement for
retail businesses. While management expects significant interest, the
uncertainty surrounding market demand poses a challenge. Given that the market
for such applications is still evolving, an accurate demand forecast is
essential for making informed decisions on
Q3. XYZ Electronics, a leading
retailer in consumer electronics, is planning to introduce a price reduction on
their latest smartphone model, the SmartTech Pro. The current price of the
smartphone is ₹50,000, and the company estimates that if they lower the price
to ₹45,000, the quantity demanded will increase from 10,000 units to 15,000
units
a) Calculate the price elasticity
of demand for the SmartTech Pro using the percentage/proportionate change
method. (5 Marks)
Introduction
Price elasticity of demand (PED) is a key economic
concept that measures how the quantity demanded of a product responds to
changes in its price. For businesses, understanding this concept is crucial for
making pricing decisions, as it helps predict consumer behavior and revenue
impact. XYZ Electronics is considering lowering the price of its latest
smartphone, the SmartTech Pro, from ₹50,000 to ₹45,000. The company
estimates that this price reduction will increase demand from 10,000 units
to 15,000 units. By calculating the price elasticity of demand,
b) Analyze the above scenario and
specify If the company observes that competitors are also reducing their prices
for similar models, how might this affect the elasticity of demand for the
SmartTech Pro? (5 Marks)
Introduction
In a competitive market, pricing decisions are rarely
made in isolation. If competitors also
reduce their prices on similar smartphone models, the demand elasticity
for SmartTech Pro may shift. While XYZ Electronics initially observed a high price elasticity (5.0) when
reducing its smartphone price, competitor
actions could alter consumer responsiveness. In this scenario, analyzing
how competition influences elasticity is essential for making informed pricing
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