Name of University:- RAYAT BAHRA UNIVERSITY, MOHALI

Batch :2021-23 Course: MBA Semester: Ist

Name: HARPREET KAUR Roll No. 2103207007
Sub Name: BUSINESS ECONOMICS Sub Code: MBA015
FOR MANAGERS
Date of Examination: 19 January Shift: 10:30 – 12:30
2022
Maximum Marks: 40 Marks Obtained:

“SECTION 1”
ANSWER 1. (c) How society manages its scare resources.
ANSWER 2 (b) Value of Income
ANSWER 3 (b) Store of Value
(c) Tranfer of value
ANSWER 4 (a) Medium of exchange
(c) Measure of value
ANSWER 5 (b) Store of value
(c) Standard of deferred
ANSWER 6 (a) Bank rate policy (b) Cash reserve ratio (d) Open market
ANSWER 7 (a) the units used to measure price and the units used to measure quantity
ANSWER 8 (b) the responsiveness of the quantity demanded to changes in price
ANSWER 9 (a) Price elastic
ANSWER 10 (d) Marshall
“SECTION 2”

SOLUTION 7.

Elasticity of Demand = Percentage change in Quantity Demanded

Percentage change in Price of the Commodity

P( ED) = % change in Q.dx = (-) 80% = (-) 2

% Change in Px (+) 40%

P( ED) = (-)2
 P( ED) < 1 i.e., Inelastic Demand
Answer : Price Elasticity of Demand is (-) 2.

ANSWER 3. MONEY is a commodity accepted by general consent as a medium of economic

exchange.|
It is the medium in which prices and values are expressed.
It circulates from person to person and country to country, facilitating trade, and it is the
principal “measure of wealth”.
In simple words,
we can say that money is a commodity accepted by general consent as a medium of economics
exchange.

Primary Funtions of Money are :

1. MONEY AS A MEDIUM OF EXCHANGE

 It refers to a function of money in which money is considered as a mode of exchanging goods.
This function of money solved the main problem of barter system which was double coincidence of
wants.
2. MEASURE OF VALUE
It refers to a function of money that helps in determining the value of goods and services. Money is
taken as the common denominator while measuring the value of goods and services in monetary terms.

ANSWER 4.
The Main Difference Between FINAL GOODS and INTERMEDIATE GOODS are :-

FINAL GOODS INTERMEDIATE GOODS

1. Final goods are those goods that are 2. Intermediate goods are goods
manufactured to be consumed which can be used as raw material
directly by the consumer. for the production of other goods.
2. Final goods are finished goods. 2. Intermediate goods are goods that are
partly prepared and can be referred to as
unfinished goods.

3. It is used for final consumption or 3. It is used by the firms to resell them, to

capital formation. generate profit.

4. Final goods are ready be consumed and 4. Intermediate goods require further
therefore do not require any further processing in order to be consumed.
processing.

5. Final goods are produced by using 5. Intermediate goods are used as raw
Intermediate goods. materials, so as to create final goods.

1.

ANSWER 2.
PHASES OF TRADE CYCLE :

Recovery:- In the early period of recovery, entrepreneurs increase the level of

investment which in turn increases employment and income. Employment
increases purchasing power and this leads to an increase in demand for consumer
goods. The rise in prices shall depend upon the gestation period of investment.
The longer the period of investment, the higher shall be the price rise. The rise of
prices shall bring about a change in the distribution of income. Rent, wages,
interest do not rise in the same proportion as prices
2. Boom:- In the boom phase, demand, output , employment and income are at a
high level . They are tend to raise prices. But wages, salaries, interest rates rent
and taxes do not rise in respect to the rise in prices. The gap between prices and
cost increases the margin of profit. The increase of profit and the respect of its
 continuance cause a rapid rise in stock value. They lead to considerable
expansion in economic activity by increasing the demand for consumer goods
and further raising the price level.
3. Recession:- Recession starts when there is a downward descent from the pea
which is of a short duration The orders for raw materials are reduced on the onset
of a recession. The rate of investment in producers’ goods industries and housing
construction declines. Liquidity preference rises in society and owing to a
contraction of money supply, the prices falls. A wave of pessimism spreads in
business and those markets which were sometime before sellers markets become
buyer’s markets now.
4. Depression:- Recession merges into depression when there is a general decline
in economic activity. There is a considerable reduction in the production of goods
and services employment, income and demand. The general decline in economic
activity leads to fall. The depression may be short lived or it may continue at the
bottom for considerable time. But sooner or later limiting forces are set in motion
which ultimately tend to bring the contraction phase to end and raise the way for
the revival. A trade cycle is thus completed.

ANSWER 8.

PRODUCTION POSSIBILITIES FRONTIER-

Production Possibility Curve refers to the graphical representation of possible combinations
of two goods that can be produced with given resources and technology.
PPC slopes downwards from left to the right. It is because, in a situation of fuller utilization
of given resources, production of both the goods cannot be increased. More of Good X can be
produced only with less of Good Y.
It shows the maximum attainable combination of two products that may be produced if we
use our resources efficiently.
It is because the resource is fixed
CHARACTERSTICS OF PPF-
1.Both constant increasing opportunity cost PPF have a negative slope (they are downward
sloping)
2.this is because of the trade offs due to scarcity we can only produce more of one product if
we give up some of the other product.
3.A good shows all the combinations of two ‘goods’ which can be provided if all resources are
being used efficiently.
SECTION 3

ANSWER 2. a) Old Price - $30

Old quantity= 625
 New price = $25
New quantity = 750
Elasticity of Demand = Percentage change in Quantity Demanded
Percentage change in Price of the Commodity

change in Quantity Demanded =( new- old) 750-625 = 125

% change in q d= 125/625*100= 20
change in Price of the Commodity=( new – old prie) = 25-30=-5
%change in price =-5/30*100= -16

ED= 20 =-1.25 Hence the price elasticity of demand is, -1.25

-16 Inelastic demand

b) As the price elasticity is more than 1, the demand is elastic. One percent decrease or
increase in price would lead to a decrease or increase in the being quantity demanded by
more than one percent. This from would lead to an increase or decrease in revenue.
Hence increase the price would be to an incorrect decision.
c) No the decision of increasing price from 25 to 28 would be considered to be unwise
as revenue it would tend to decrease from its percent level.

ANSWER 1.
a) Ans.
When the charges were increased then the 5% of the traffic was already reduced, now if our
revenue is 5% less that is already 95% of its total revenue then the amount we got is less
then the price 100/- at100%. It can not be able to work in long run because our charges are
increasing and our toll charges revenue is decreasing.
b) Ans.
The total charge is 100 at 100% when it raised to 150 it may lead as 95% of total charge. 5%
loss would not be considerable. We can set the toll charge to be 122 rupees for the same
amount of traffic and the charge will be considerably increase later.
c) Ans.
No, according to me revenue would increase when reduced 10% of charges that is 100/- i.e 90/-