MS - 09 Managerial Economics

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ASSIGNMENT

Course Code                                                               :                            MS - 09

Course Title                                                                 :                            Managerial Economics

Assignement Code                                                    :                            MS-09/TMA/SEM-I/2017

Coverage                                                                     :                            All Blocks

Note: Attempt all the questions and submit this assignment on or before 30th April, 2017 to the coordinator of your study center.

Question.1. Opportunity costs are the ‘costs of sacrificed alternatives.’ Discuss with the help of examples.

Answer:Opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action. Stated differently, an opportunity cost represents an alternative given up when a decision is made. This cost is, therefore, most relevant for two mutually exclusive events. In investing, it is the difference in return between a chosen investment and one that is necessarily passed up.

When assessing the potential profitability of various

Question.2. How are income effect and substitution effect important in explaining the negative slope of demand functions? Explain giving examples from real world.

Answer:The substitution effect is the change in consumption patterns due to a change in the relative prices of goods.  For example, if private universities increase their tuition by 10% and public universities increase their tuition by only 2%, then it is very likely that we would see a shift in attendance from private to public universities (at

Question.3. When there are 2 inputs K, L, given the price of capital (PK)= 10 and price of labour (PL)=20. Total Expenditure C=100. Draw and explain the effect on the isocost curve in case of the following:-

(i) decrease in price of labour (PL)=10

(ii) increase in the price of capital (PK)= 20

(iii) decrease in the price of capital (PK)= 5

(iv) increase in the firms budget with no change in the price of labour and capital.

Answer:There are two methods of explaining the optimum combination of factor:

(i) The marginal product approach.

 (ii) The isoquant / isocost approach.

These two approaches are now explained in brief:

Question.4. Explain the difficulty in sustaining collusion with the help of prisoner’s dilemma.

Answer:The prisoners’ dilemma is the best-known game of strategy in social science. It helps us understand what governs the balance between cooperation and competition in business, in politics, and in social settings.

In the traditional version of the game, the police have arrested two suspects and are interrogating them in separate rooms. Each can either confess, thereby implicating the other, or keep silent. No matter what the other suspect does, each can improve his own position by confessing. If the other confesses, then one had better do the same to avoid the

Question.5. Briefly discuss the Chronology of Indian Telecom Deregulation from the year 2003 to present times.

Answer:India's telecommunication network is the second largest in the world by number of telephone users (both fixed and mobile phone) with 1.053 billion subscribers as on 31 August 2016. It has one of the lowest call tariffs in the world enabled by mega telecom operators and hyper-competition among them. India has the world's second-largest Internet user-base. As on 31 March 2016, there were 342.65 million internet subscribers in the country.

Question.6. Write short notes on the following:-

(a) Market Demand curve

Answer:The market demand curve is the summation of all the individual demand curves in a given market. It shows the quantity demanded of the good by all individuals at varying price points. For example, at $10/latte, the quantity demanded

(b) Optimal Input Combination

Answer:Optimal input proportions can be found graphically for a two-input, single-output system by adding an isocost curve or budget line, a line of constant costs, to the diagram of production isoquants. Each point on the isocost curve represents a combination of inputs, say, X and Y, whose cost equals a constant expenditure.

MRP Curve Is an Input Demand Curve

(c) Peak Load Pricing

Answer:Peak Load Pricing is a pricing strategy that implies price will be set at the highest level during times when demand is at a peak. The pricing strategy is an attempt to shift demand, or at least consumption of the good or service, to accomodate supply. The idea is that pricing higher when demand is at its peak will balance out the supply and demand so that there is no shortage on either end of the spectrum. If a good is priced at a high cost and many demand it, a capacity will be balanced. This is a type of price discrimination; a

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