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Xaviers Institute
of Business Management Studies
Managerial Economics Question
Paper
Maximum
Marks: 80+20 Paper Presentation
Instructions:
• Answer
all questions as per the given instructions.
•
Support your answers with relevant economic theories and real-world examples.
• Clarity, depth of analysis, and logical reasoning
will be given additional weightage.
Section
A: Descriptive Questions (20 Marks)
(Answer
any four questions, each carrying 5 marks.)
1. Explain the law of demand and its exceptions with real-world
examples.
Answer:
Law of Demand and its Exceptions with Real-World Examples:
- Law of Demand: The law of demand states that, ceteris paribus
(all other factors remaining constant), as the price of a good or service
increases, the quantity demanded decreases, and vice versa. This inverse
relationship is due to the substitution effect (people switch to
alternatives when prices rise)
2. Discuss how cost-volume-profit (CVP) analysis helps managers in
decision-making.
Answer:
Market Structures and their Influence on Pricing Strategies:
- Perfect
Competition: In this market
structure, many sellers offer identical products, and prices are
determined by market forces of supply and demand. Pricing strategies are
highly competitive, and firms are price takers. Example: Agricultural
products like wheat.
3. How do market structures (perfect competition, monopoly,
oligopoly) influence
pricing strategies?
Answer:
Market Structures and their Influence on Pricing Strategies:
- Perfect
Competition: In this market
structure, many sellers offer identical products, and prices are
determined by market forces of
4. Describe the role of managerial economics in risk and
uncertainty analysis.
Answer:
Role of Managerial Economics in Risk and Uncertainty Analysis:
- Managerial
economics helps businesses navigate risks and uncertainties by applying
economic theory to decision-making in uncertain environments. It provides
tools for analyzing market risks, such as fluctuations in demand,
5. How does foreign exchange rate fluctuation affect international
businesses?
Section
B: Case Studies (60 Marks)
(Answer
all case studies, each carrying 20 marks.)
Case Study 1: Demand Forecasting for a New Product
Scenario:
A smartphone company, Techo-Mobile, is planning to launch a new
model in a highly
competitive market. The company needs to forecast demand
accurately to optimize
production and pricing strategies.
Questions:
a) What factors should Techo-Mobile
consider while forecasting demand?
Techo-Mobile should consider the following factors while forecasting demand for
their new smartphone model:
- Market Trends: The overall growth or decline in the smartphone
industry and technological advancements influencing consumer preferences.
- Competitor Analysis: The strategies, pricing, and market positioning
of competitors launching similar models.
b) Explain
the different methods of demand forecasting and suggest the best approach for
Techo-Mobile?
There are several methods of demand forecasting, each suited for different
types of data and market conditions:
- Qualitative Methods:
- Expert Opinion: Consulting industry experts or key stakeholders
for insights on demand predictions.
- Market Research Surveys: Gathering consumer opinions and preferences
through surveys.
c) How can incorrect demand forecasting
impact the company’s profitability?
Incorrect demand forecasting can significantly impact Techo-Mobile’s
profitability in several ways:
- Overproduction:
- If demand is
overestimated, Techo-Mobile could produce excess inventory, leading to
increased storage and distribution costs. Additionally, unsold products
may need to be discounted or written off, leading to revenue loss.
Case Study 2:
Cost Analysis for Profit Maximization
Scenario:
A manufacturing firm, AutoParts Ltd., is facing increasing
production costs, reducing its
profit margins. The management wants to analyse fixed and variable
costs to find cost
cutting opportunities.
Questions:
a) Explain
the difference between fixed costs and variable costs with examples?
- Fixed Costs: These are costs that do not change with the
level of production or sales. They remain constant regardless of the
number of goods produced or services rendered within a certain range of
output.
b) How can
AutoParts Ltd. use marginal cost and marginal revenue analysis to maximize
profit?
- Marginal Cost
(MC): Marginal cost is
the additional cost incurred by producing one more unit of output. It
helps businesses understand the cost of increasing production and can be
used to determine the optimal production level.
c) Suggest
cost-reduction strategies to improve profitability without compromising
quality?
AutoParts Ltd. can implement the following cost-reduction strategies to improve
profitability without compromising product quality:
- Process
Optimization:
- Streamline
manufacturing processes through techniques such as lean manufacturing or
Six Sigma. This minimizes waste, reduces production time, and lowers
operational costs without affecting the quality of the final product.
Case
Study 3: Price Elasticity of Demand and Revenue Management
Scenario:
A luxury car manufacturer, Elite Motors, wants to determine the impact
of price changes on
sales volume. The company is considering reducing prices to
increase demand but is unsure
whether it will lead to higher revenue.
Questions:
a) What is
price elasticity of demand, and how does it impact revenue?
- Price Elasticity
of Demand (PED): Price elasticity
of demand measures the responsiveness of quantity demanded to a change in
the price of a product. It is calculated as the percentage change in
quantity
b) How can Elite Motors determine whether
demand for its cars is elastic or inelastic?
Elite Motors can determine the elasticity of demand for its cars through the
following methods:
- Market Research and Surveys:
- Conduct surveys
with potential customers to understand how sensitive they are to price
changes. Questions could focus on whether customers would still buy the
car if the price
c) Suggest an optimal pricing strategy
based on price elasticity analysis?
Based on the price elasticity analysis, Elite Motors can adopt the following
pricing strategies:
Dear students, get fully solved assignments
by professionals
Do send your query at :
or call us at : 08263069601
(Plagiarism proofed assignments available with 100% surety and refund)
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