PGDM Batch 2020-2022

Microeconomics Final Examination Question Paper

26th December 2020
NAME – Sourabh Singh
Roll – DM22170

Question 1. (18 Marks)

After the effect of current pandemic is over, you are starting one of the following
businesses. Funding is available. Viability is established.

DO IT YOURSELF FURNITURE.

 Clearly specify the location, scope, and the nature of the business
I will prefer starting the furniture business online as compared to having an offline
one as it has been mentioned funding won’t be an issue but this pandemic has
taught us to have a backup online so why not start in a reverse manner. Online has
its own pros:
A) In coming 5 years 2025 we call it the next billion population will be having
access to internet to this domain of population which will include people from
all strata’s.
B) Building business models for online ecosystem is easy and we can manage the
whole system remotely which will further increase our extent of business.
SCOPE : Scope of online market can attract people from all across the country
and promotion advertisement thus increasing your brand image becomes much
easier.
Nature – Lifestyle now-a-days has changed so much that labor and service cost
are increasing day by day which has now become unaffordable. I think this is
where our business idea plugs in and has a terrific future positively.
 Discuss the market structure and competitive scenario of your business
In India the current market scenario only few brands or brand are in the top. So
our business model or market structure will be monopolistic in nature. The
business being online we are expecting many buyers and sellers to make products
of different size, features which will enable the customers to think innovatively.

Major competitors will be the designer furniture brands like IKEA which provides
affordable options to furniture.
 Discuss, in brief, three variables that will influence your prices
1.Quality – Quality has always been the most important driving factor for any
B2C company. We will aim to provide the best in class materials along with
services.
 2. Duty Taxes – Raw materials will play important role on the price levels as the
goods will largely be imported. Import duties will largely control the prices of
furniture.
3. Customization – If we provide high level of customization this might effect the
pricing levels of furniture.
 Discuss, in brief, three variables that will influence your cost.
1. Supply chain – Metro cities will be having greater connectivity’s as compared
to rural areas so to deliver products. So well connected areas i.e infrastructure
development influences the cost.
2. Labour cost – Skilled labors are hard to find and are costly. They can charge as
per the market demand. We can take unskilled labors and then train them
accordingly. Reduces the cost.
3. Marketing – Furniture has always been a materialistic product that needs our 6
senses to get a feel of it. As long as our business setup is online marketing is
cheap but in future if we move to offline this will play a huge role to cost.

 Discuss two defined ways in which you will seek to create ‘preference’ in the
minds of the buyers

Product Differentiation – We need to customize the products so that the look

and feel suits the needs of color and designs of homes or office
Interior design – We can have consultation which can be charged or can be free
based on décor. We can have some maintenance contract for say 5 years that
allows maintenance on some specific issues.

 What will be your pricing strategy? (You are not expected to give exact
pricing.)
Since this will be a monopolistic market we should have price that is directly
proportional to our quality and at par with the ongoing market price.
Our aim will be always to provide better quality so will increase the profit margins
by reducing costs and once we get into the market we can have our own set of
process that will create a brand image.
 What will be your growth strategy for next five years?
The growth strategy for our business model we will dedicate 5 years to full
fledged online platform, keep the operational capabilities in check and then as we
all know furniture is a materialistic product it requires our senses to feel we will
move to offline stores maybe we can have offline portable show outlets that can
go residence by residence according to the demand and show them the products.

QUESTION 2 (27 Marks)

Answer ANY THREE of the following questions in detail. (Less than 350 words
in each response would be considered as sketchy). Please carefully read and
follow instructions or comments in the questions. Ignoring them would cause
unnecessary and irrelevant inclusions in the response.

2.a
Discuss at length two important lessons YOU have learnt in the course in
Microeconomics. (Only what was covered in the sessions). Discuss what makes the
lessons important for YOU. (The focus is on what you have learnt and copy-paste
from notes or text book or web sources describing microeconomics for management
would be irrelevant).

Ans: The two important lessons that I have learnt from the Microeconomics class are
as follows and I have given in detail explanation to it:
First Lesson:
There is always a trade off in any decision we take. Trade is basically what we are
getting and what we are going to lose due to the decision we took. For e.g., I choose to
do an MBA with a mortgage of Rs.17,15,000. Instead, if I would have joined the
company in which I was offered the job, I would have earned Rs.9,00,000 in two
years and a salary hike would have been received and work- experience for 2 years,
which would have given me the opportunity to earn close to 5.5LPA at the beginning
of the third year(exactly the time when I would have completed my MBA) and would
also have saved close to 19 lakhs in these 2 years as I would have saved my fees and
the extra costs that will be incurred in these 2 years apart from the curriculum fees and
some amount that I would’ve saved while doing a job.This will be the opportunity
cost of the money spent of doing an MBA. But people incur this cost as they think that
they will be able to benefit from the amount that is invested. E.g. I would be joining
the corporate world in few days.
Second Lesson:
Technology goes in Hand in Hand. As we are advancing in technology the skill
required to cope up with modern technology is also advancing which is creating a big
unemployment gap.
Current pandemic taught us to be having a online backup of your business as we can
see currently the business are running inline via different platforms like Zoom Meet,
WebEx etc. Housewives are also ordering food and groceries online. Medical
consulting are been done online along with checkups that made the treatments
possible.Delivery sites likes grofers, big basket, Medplus, , amzon pantry, Swiggy
zinie etc have played a very important role with respect to technological advancement
and how did they skilled up their employees and end users.But among all this
technological development the illiterate has suffered the most.

2.b
Evaluate the impact of technology on the micro economy worldwide. Assess, in
detail, one positive and one negative microeconomic outcomes of technology led
changes. Also discuss how changes in technology in a decade will change the
structure of industries.

Ans: Growth has always been correlated with Technology. The situation of the
economy depends on technology and the technological mindset you are in. This exact
thought is well explained by an example which states that how a group of merchants
captured half of the known world in the 15th century. Soon after the industrial
revolution in the 18th century we witnessed that the western countries can now
produce much more thus this impacted the decrease in the rate of goods and increase
in the status. Technology has been linked to marketplace transformation, improving
living standards and more robust international trade.

How we produce and how we transport this has rightly been changed by technology.
What it did is to save time by increasing the efficiency. We are now capable of
producing large quantity of goods and better services and transport them to far of
places . Even in economics technology has been considered as one of the important
driving factors.

Technology and its inequality – With high technological advancement there is a spur
employment growth but there is a increasing inequality in the backend.. Knowing
technology which is everchanging it requires skill. I might quote one example here
specifically Europe between its mid 1990’s and 200’s there was this income inequality
suddenly increased . The gap between the elementary jobs and the jobs that required
managerial skills, widened through out the world. This was one of the reasons behind
K-shape recovery all over the world.

The upcoming decade will be more promising and exciting when we talk about
technology. Big Data will play an important role ahead. Around 90% of all data in the
world has been generated in the recent past because the digital transactions has
increased. Paired with AI and ML we can see places never seen before.
IT can be a invaluable for the business. We currently have 3 ZTB of data in the world,
an interesting fact about data here is that we have created more data after 2000 from
per minute TV binging , connected devices that include smart watches. Estimated data
storage can go upto 175ZTB in the upcoming next two decades.

2f.
In the globalized world, most businesses will be oligopolistic. Discuss the reasons why
oligopoly has become the dominant form of market structure.

Ans-Oligopoly is basically a small market structure where there is a minority in the number
of firms where none can make the others from having a influence over the others. In
Monopoly we see majorly dominance of one firm in duopoly the dominance of two firms.
But if we have greater than two firms but a minority when consider the whole population it is
called oligopoly. These few firms can coordinate and the prices can be raised if restricted.
Above the normal market returns the collective economic profitsare increased and they
helped it to do that. This is called collusion when they collude for for shared interest. OPEC
is such an example of colluding market that is having a dominant market share on petroleum
products.
In United States TV and fast internet sector is an oligopoly, although 5 companies dominate
the market there are plenty of competitors.In United Kingdom three fourth of the grocery
store or share market in UK is controlled by just four supermarket chains.
Oligopoly is the dominant structure because it has got characteristics that only few firms will
be having the resource and market structure to run such high economies of scale. Oligopoliea
are in comparison to mono poly less concentrated in a competitive market.. To engage in
collusion of setting prices its not allowedand also illegal for the competitors to engage in. but
however pricing remain stable in oligopoly. Prices are usually kept lower than they couldwith
the sole motivation toof keeping new companies out of the market by making them difficult
to offer similar prices.. In oligopoly business offer products or services that are nearly
identical and similar. This actually motivates the firms to compete in the non price zone like
advertising packaging and value added firms.

The money has always been the barrier for competitors to enter the market. Access to
resources and patented processare other barriers . To business actions and ordersand issue of
liscences from govt authorities and other legal entities. So therefore we may conclude perfect
competition does not exist and hence the oligopoly become dominant in the market structure.

Reference :

2f -
https://www.economicsonline.co.uk/Business_economics/Oligopoly.html#:~:text=Oligopolie
s%20and%20monopolies%20frequently%20maintain,rivals%20to%20enter%20the
%20market

2b-
https://www.oecd-ilibrary.org/docserver/9789264026780-en.pdf?
expires=1608992887&id=id&accname=guest&checksum=FAEEAF71342BE28B0365391A5
22BF460