ANS.

1 -LET THE MARGINAL UTILITY OF WHEAT=X

THE MARGINAL UTILITY OF RICE=2.5

[BECAUSE IT IS 2.5 TIME OF MU OF WHEAT]

LET PRICE OF WHEAT/KG =RS.12

SO MU OF RICE=12*2.5

ANS. =RS.30

ANS.2- BEST ALTERNATIVES OF SOURCES & BORROWING OF MONEY &FUNDS-

WE SEARCH FOR THE ALTERNATIVES OF SOURCES OF MONEY &FUNDS WHICH
HELP US FOR THE PRODUCTION.THAT HELP US TO FLOW OUR COMPANY.

2)SELECTION OF BEST ALTERNATIVES/HIGH RETURNS/ON BASIS TIME PERIOD-

WE CHOOSE THAT ALTERNATIVES OF PRODUCT WHICH GIVE US QUICK RETURNS
&GIVE US PROFIT&TAKE LESS TIME TO OPERATE.

3)PRIMARY CUSTOMERS /NATION&PERSONALGROWTH&DEVELOPMENT-WE

HAVE TO CONCENTRATE ON THE CONSUMERS TESTE WHAT THEY LIKE WHAT
NOT BECAUSE IF THEIR WILL BE INCREASE IN THE PURCHASING OF THE
CONSUMERS TO OUR PRODUCT IT WILL GIVE US NATION GROWTH &PERSONAL
GROWTH WHICH IS IMP FOR EVERY ORGANISATIONS.

Ans 3. Price of Tomatoes (PT) =Rs. 7/kg

Price of Potatoes (PP) = Rs.10/kg

Income ( I ) = Rs.35000

Now income spend on tomatoes = PT/ I= 35000/ 7

=Rs.5000

And income spend on potatoes = PP/ I =35000/10

y 5000 =Rs. 3500

4000

3000

2000 (Budget line)

 1000

0 1000 2000 3000 3500 4000 5000

ANS.-4) A-DECREASING

B- DECREASING DUE TO COMPETITIONS.

C- INCREASING DUE TO RISE IN INCOMES.

D- NO CHANGE IN PRICE.

E- DECREASING DUE TO BOTTLE RATE LEAD TO RISE IN PRICE OF WINE.

ANS.-5) A-DECREASING.

B- DECREASING.

C- INCREASING.

D- DECREASING.

E- DECRESING IN CURRENT INCREASING IN FUTURE.

Ans 6:-A)In economics, the income effect is the change in consumption resulting from a
change in real income.

With a higher income, there will be a new budget constraint line that intersects a
higher indifference curve. The income-consumption curve is the intersection of the points of
tangency of the sets of budget constraint lines and indifference curves.

In consumer theory, an inferior good is a good that decreases in demand when consumer
income rises, unlike normal goods, for which the opposite is observed.[1] Normal goods are
those for which consumers' demand increases when their income increases. [2] Inferiority, in this
sense, is an observable fact relating to affordability rather than a statement about the quality of
the good. As a rule, too much of a good thing is easily achieved with such goods, and as more
costly substitutes that offer more pleasure or at least variety become available, the use of the
inferior goods diminishes.

Depending on consumer or market indifference curves, the amount of a good bought can
either increase, decrease, or stay the same when income increases.

Good Y is a normal good since the amount purchased increases from Y1 to Y2 as the
budget constraint shifts from BC1 to the higher income BC2. Good X is an inferior good since
the amount bought decreases from X1 to X2 as income increases

Ans 7.Yes,the demand curve for this company is positively sloped because there is positive
relationship between demand and supply.

When the demand curve is positive,slope due to increase in price,price is also increase.

Exceptions to the law of demand:-

Giffen Goods:-The case of Giffen goods needs a little of story telling!In early Ireland,it was
observedthat the poor population consumed two goods:meat(which was costly)and bread (which
was cheap).a very strange phenomenon was observed when the price of bread was increased,it
made a large drain on the resourses of the poor people and raised their marginal utility of money
to such an extent that they were forced to curtail their consumption of meat and buy more of
bread,which was still the cheapest food.This impilied that quantity demanded of bread(an
inferior good)increased with increase in its price.

Snob Appeal :-Opposite to Giffen goods,there are certain goods which have snob value,for
which the consumer measures the satisfaction derived from these commondities not by their
utility value,but by social status.the consumers of this particular commmondity want to show it
off to others,and as a result they buy less of it at lower prices and at higher prices.Thus in
case.price and quantity move in same direction.

Ans 8. :-Income of shweta=$42

Expenditure on 12 pizza @ $2=$24

Expenditure on 18 softdrinks @ $1=18

Total expences=$42

Since,marginal rate of substitution=1

Therefore,sacrifices of soft drink must be equal to gain of pizza.

I,e. 14 pizza and 14 softdrinks

14*2=24;14*1=14.

Total=42.

Ans 9. Yes ,the mayor should contemplate to increase the price of subway because price
elasticity is the ratio between percentage change in quantity demanded and percentage change in
price.

Hence contemplate of increase in price will leads to increase revenue.

Ans 11.. .. You are working for coca-cola as the market head. The company is planning to float a
new drink which is white in colour. What lessons from the concept of elasticity can you draw
while fixing the price for this new drink?

:-There are various methods while fixing the price for this new drink:-
1.Perfectely Elastic Demand :-This is one extreame of the elasticity range,when elasticity is
equal to infinity.In this case,unlimited quantities of the commodity can be sold at the prevailing
price and even a negligible increase in price would result in zero quantity demanded.
2.Higly Elastic Demand:- When proportionate change in quantity demanded is more than a
change in price,the commondity is regarded to have a highly elastic demand.In otherwords,ep >
1(in absolute terms),such that a proportionate change in quantity demanded is more than a
proportionate change in price.
3.Unitary Elastic Demand:-When a given proportionatechange in price brings about an equal
proportionate change in quantity demanded,then demand for that commondity is regarded as
unitary elastic.In otherwords,ep=1.
4.Relatively inelastic demand :-when change in quantity demanded is found to be offset by
change in its price,then the commondity has a relatively inelastic demand.In otherwords,ep<1.
5.Perfectly Inelastic Demand :-In this case the quantity demanded of a commondityremains the
same,irrespective of any change in the price,i.e,quantity demanded is totally unresponsive to
change in price.

Ans.12. Scarce Resourses:-These are those resources which have more demand than there
supply.Example of scare resources is petrol.

If we do not had scarce resources the law of demand will not be applied.As we know
the law of demand is applied when we have scare resources.

No,there will be no price rationing of goods because scarce resources are not
scare.Fixing of price is due to force of demand,supply or according to government rules as the
resources are not scare from both the things are not apply.

Ans.13 A ) man-made resource as computer is made by man.

B ) man-made resourse as office building is made by man.

C ) Time is not the resourse.

D ) Man made resource.

E ) Natural resourse.

F ) man-made

G ) man made.

Ans.14. ) Demand schedule:-

Price QuantityDemand

100 4500

200 4000
 300 3500

400 3000

500 2500

Demand curve:-

Y D

500

400

300

200

100 D

1000 2000 3000 4000 5000 X

B:- Q = 5000 - 5p

Q = 5000 – 5(25)

Q= 5000 – 175

Q= 4825

C:- Q = 5000 – 5 (p)

2500=5000 – 5(p)
 -2500 = - 5(p)

2500/5 = p

500 = p

Hence price = 500.

D:- Q = 5000 – 5 (P).

Q = 5000 – 5 (500)

Q= 5000 – 2500.

Q= 2500.

E:- Q=5000 – 5 (20)

Q= 5000 – 100.

Q = 4900

Ans 15. If Domestic servants get increased in his Income then it leads to Rise in the or
upward shift in the demand of consumption of Food and clothing. This can be clearly
understand by the graph.D1

Y D

10

5 Rise in income leads to increase in consumption

price D1

0 5 10 X

(Food & clothing)