Assignment: Microeconomics for MBA. Instructor Dr.

Mehboob ul Hassan September 11, 2012

Microeconomics for MBA (Evening) Sep. 2012 Assignments MBA

Total Marks 15 Q. 1 Comment, in brief, on the following statements: (Marks 2) a. Isn't it strange? The same people who laugh at gypsy fortune tellers take economists seriously.

b.

Much cost we pay when the cost is ZERO.

We cannot count how will cost we pay when we get something for free or when the price of a product is zero The food which we eat in wedding, the promotional Tshirts, Tea cups all are what we think we are lucky to get it free without even paying for it but actually we are saving million of expenses of those companies because they do not have to market their products as we are doing one to one marketing for them or personal marketing nor they have to pay to them but rather we are marketing their product and not even getting paid for that.

Q. 2 Give TWO examples, each for a Positive and Normative statement. (Marks 2) The statement that society faces a short-run tradeoff between inflation and unemployment is a positive statement. It deals with how economy is not how it should be. Positive: A ceiling on rent reduces the quality & quantity of housing available. Normative: the government should not apply price ceiling on housing and let it run freely. Positive: Normative: Very rapid growth is the cause of inflation the government should keep money growth low.

Q. 3 Explain the Opportunity Cost of studying at MBA Program (Marks 4) Page 1 of 3

Assignment: Microeconomics for MBA. Instructor Dr. Mehboob ul Hassan September 11, 2012
Opportunity costs are not just a theoretical consideration in economics but they also have real practical impacts on decisions. If you take an example of me MR. Muhammad Khizer Hayat an officer at Habib Bank Ltd who has decided to study for an MBA Evening program to enhance my educational skills. The cost of the MBA studying from PAF KIET is 102000 Rs at 8500 Rs per Course and will increase according to per course charge which may increase over the three years of my MBA so it may be around 300000 Total in Rs. However, if I have an opportunity to work overtime after office hours on commission basis with 350 per hour from 6 to 9. I can earn an extra 84000 per year at the same time. Therefore Opportunity Cost in terms of Monitory would be MBA cost around 300000 for three years + overtime earning of 84000*3= 252000 so the total economic cost of the MBA would be around 552000. During this period I will also face opportunity cost of time management as well as career choice. Rather than studying an Mba program i could have used that time in socializing or going to gym.

Q. 4 Suppose, you have a budget of PKR 80,000 for six months, how would you disburse/allocate this budget into following overheads: (Marks 7) a. Education/Tuition Fee b. Clothing c. Commuting d. Leisure/Entertainments e. Food.

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Assignment: Microeconomics for MBA. Instructor Dr. Mehboob ul Hassan September 11, 2012
51000 5000 3000 14000 7000 51000 10000 6000 17000 10000 40000 4000 2000 9000 5000

6000 I. II. Show each of these overheads on the radar/rotate/web graph in Black ink. How would you spending behavior changed, if your budget increases by the PKR 20,000, draw this graph in Blue ink? Will you expand your consumption basket with new overheads/items or will remain the same and develop the quality/taste/standard? Also describe the situation, when your budget decreased by PKR 20,000, mention this behavior in Red ink on the same graph. Will you reduce your consumption basket by some overheads/items or will lower the quality/taste/standard?

III.

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