(SEM V) THEORY EXAMINATION 2018-19 MANAGERIAL ECONOMICS

MANAGERIAL ECONOMICS (RAS-501)

B.Tech (SEM-V) – AKTU
                                                                                                       Time: 3 Hours  Total Marks: 70

SECTION A

(Attempt all questions – 2 × 7 = 14 marks)

Q1 (a) Explain the meaning and nature of economics.

Economics is a social science that studies how individuals and organizations allocate scarce resources to satisfy unlimited human wants. It deals with production, distribution, exchange, and consumption of goods and services.

The nature of economics is both theoretical and practical. It explains economic laws and also helps in solving real-world problems related to pricing, cost control, demand forecasting, and resource allocation. Economics is also a decision-making science, especially useful for managers.

Q1 (b) What do you mean by demand?

Demand refers to the quantity of a commodity that consumers are willing and able to purchase at a given price during a specific period of time. Mere desire without purchasing power does not constitute demand.

Q1 (c) State the factors affecting supply.

Supply is affected by cost of production, level of technology, prices of related goods, government policies, taxes, subsidies, number of sellers, and expectations about future prices.

Q1 (d) Define elasticity of demand.

Elasticity of demand is the measure of responsiveness of quantity demanded to changes in price, income, or prices of related goods. It helps firms in pricing and production decisions.

Q1 (e) What is opportunity cost?

Opportunity cost is the value of the next best alternative forgone when a particular choice is made. It represents the real cost of a decision.

Q1 (f) Define marginal cost.

Marginal cost is the additional cost incurred by producing one extra unit of output. It plays a crucial role in determining optimum output and pricing decisions.

Q1 (g) What is inflation?

Inflation is a continuous rise in the general price level of goods and services over time, leading to a decline in the purchasing power of money.

SECTION B

(Attempt any three – 7 × 3 = 21 marks)

Q2. Explain the law of demand and its exceptions.

The law of demand states that, other things remaining constant, quantity demanded of a commodity decreases when its price increases and increases when price falls. There is an inverse relationship between price and demand.

However, this law does not apply in certain cases known as exceptions, such as Giffen goods, Veblen goods, speculative demand, necessities, and situations where consumers expect future price changes. In these cases, demand may rise even when price increases.

Q3. Explain the law of supply with the help of a diagram.

The law of supply states that, other factors remaining constant, quantity supplied increases with an increase in price and decreases with a fall in price. This is because higher prices motivate producers to supply more to earn higher profits.

Graphically, the supply curve slopes upward from left to right, showing a direct relationship between price and quantity supplied.

Q4. What are the different types of costs? Explain with examples.

Costs are classified into fixed cost, variable cost, total cost, average cost, marginal cost, and opportunity cost.

For example, rent of factory is a fixed cost, raw material cost is a variable cost, and marginal cost is the cost of producing one additional unit. Understanding cost behavior helps firms in planning and decision-making.

SECTION C

(Attempt any two – 7 × 2 = 14 marks)

Q6 (a) State the law of variable proportions.

The law of variable proportions states that when one factor of production is increased while other factors are kept constant, total output initially increases at an increasing rate, then at a diminishing rate, and finally decreases.

This law explains short-run production behavior and helps in determining the optimum use of variable factors.

Q6 (b) What are the different types of costs? State with examples.

Costs include fixed cost (rent), variable cost (wages), marginal cost, average cost, sunk cost, and opportunity cost. These costs are important for pricing, profit planning, and output decisions.

Q7 (a) How can a trade cycle be controlled?

Trade cycles can be controlled through monetary policy, fiscal policy, public investment, credit control, and price stabilization measures. Government intervention helps reduce economic fluctuations and maintain stability.

Q7 (b) What are various investment decisions for boosting up economy?

Investment decisions include investment in infrastructure, education, healthcare, technology, manufacturing, agriculture, and small-scale industries. Such investments increase employment, productivity, and overall economic growth.