BUSINESS

ECONOMICS
SEMESTER I
Internal Assignment
Answer.1:

Introduction:
Each company is guided by the feedback it receives from its customers. The more customers
like its products and services, the more sales it will produce and market share it will gain. In
economics, it's referred to as the enjoyment a customer gets from consuming a thing. As a
result, the manufacturers must adopt a specific method to assess this delight and work
accordingly in order to achieve a much larger market share. As a result, various methods for
measuring this level of contentment exist, one of which is the Indifference Curve.

Concept and Application:

Marginal rate of substitution:

There are different goods for the consumer's benefit in any marketplace. There are two types
of goods: homogeneous and heterogeneous. Every suitable is made for the client's intake. The
customer can compare the products on a variety of factors to see which one will provide him
with the most satisfaction. After all, the client's joy is the entire sport of economics
production and consumption. Something items will satisfy the consumer more significantly,
the greater the demand for that product, and the greater the demand, the greater the
production of that product, and the more production, the more revenue generation, and thus
the market equilibrium will be maintained as an advanced marketplace alongside the final
GDP. Many components of this study are within your means and could help raise the
market's GDP. Utility is the inspiration for this satisfaction principle. The degree of pleasure
or satisfaction derived from a financial activity is referred to as utility. In this instance, it will
be the pleasure or delight that one client derives from eating the goods. For example, if a
customer buys a hamburger to satisfy hunger and have a good meal, that hamburger's
consumption will be referred to as acquiring some utility.
The amount of things a client is inclined to switch to another top is referred to as the marginal
substitution price. This approach is based on the assumption that the utility or pleasure
obtained from the consumption of any commodity is equal. In order to evaluate the
indifference curve, the marginal substitution price is used. One of the ordinal ways for
gauging consumers' utility is the indifference curve. The level of consumer satisfaction in the
two groups is measured here. Then it's far located that the consumer's level of enjoyment
remains constant. When a customer begins to consume more than one product, It will
decrease consumption of the alternative and vice versa. That is how a consumer can divide
his or her software and fulfil his or her pride from the two available products.
The indifference curve has a bad slope: the indifference curve has a bad slope because of the
Marginal charge of Substitution. It's the proportion of two commodities' marginal utility.
MRS x,y = – ΔY /ΔX = MUx/MUy. With is how it's written. As the use of precise A
increases, the consumption of appropriate B falls. The marginal cost of substitution is
decreasing, which has an effect on the dreadful slope.
 X ΔX Y ΔY MRSxy =(ΔX/ΔY)

A 25 - 3 - -

B 20 -5 5 2 -2.5

C 16 -4 10 5 -0.8

D 13 -3 18 8 -3.7

-0.2
E 11 -2 28 10

It's worth noting that the Marginal Price of Substitution is low due to the indifference curve's
negative slope. It's because once you start increasing the consumption of one thing, say X,
you can't stop. You will begin to reduce your consumption of some other true, say Y, because
the extent of or amount of pleasure being experienced at all locations or factors along the
curve is the same.

Conclusion:
The cardinal and ordinal techniques are two common methods for measuring client
satisfaction/utility. The cardinal techniques are typically used when pride is expressed in
numerical terms. The ordinal approach, in which utility is quantified in terms of ranking, is
the polar opposite. The indifference curve is one of the most basic ways for calculating
purchaser utility. Then it is discovered that the consumer's pleasure level remains constant at
each location. When a customer consumes more than one product, their consumption of the
other product decreases, and vice versa. That is how a consumer can divide their application
and satisfy their pride from the two things available to consume. Then it is discovered that the
consumer's pleasure level remains constant at each location. When a customer consumes
more than one product, their consumption of the other product decreases, and vice versa. That
is how a consumer can divide their application and satisfy their pride from the two things
available to consume.
Answer.2:

Introduction:
The revenue created by a firm or an organisation from the selling of a good or service by a
manufacturer to its clients is known as sales. Sales are computed by multiplying the price of
the commodity by the quantity of the product. In monetary terms, a company strives to
provide an increasing number of items until the marginal revenue of the goods exceeds the
price of the commodity. It implies that the manufacturer can cover its standard variable value,
that the manufacturer is in the process of earning money, and that he can keep the production
going in the future. The remaining purpose for any producer is to make a profit.

Concept & application:

TOTAL REVENUE and MARGINAL REVENUE:

The earnings earned by the manufacturer from the complete manufacturing of all the gadgets
are referred to as overall sales. The total sales can be calculated by multiplying the price of the
commodity by the amount produced by the producer. This can be expressed as follows:

TR = P * Q; where
P= price of the commodity
Q= quantity supplied of the product
TR= total revenue

It favors the fee price inclusive of the internet or gross profit through the manufacturer to the
charge determined by combining the prices of all factors. We'd be able to calculate actual
general sales at that point. Each cost price and the producer's profit margin are included in the
sales. Profit can be calculated later. In any other instance, the general income computation will
be disrupted.
However, marginal revenue is the revenue or income that the producer will receive from each
additional unit produced. It is estimated in addition to the production done during the core
product's manufacturing. A marginal product, for example, would be the sales that the
manufacturer may obtain by producing an extra unit of textiles.
It is computed as:

MR= change in TR from each extra unit produced/ exchange in several portions produced.
The ultimate goal of any company or business is to make money. The greater the profit, the
greater the producer's long-term viability. A company is said to be maximising profits when
its output is such that marginal sales and marginal value for the last unit produced are equal.

In simple terms, it's the profit created by the producer's sale of the extra unit. The advertising
management group uses marginal revenue to identify customer demand, arrange marketing
schedules, and establish product prices. In financial terms, a company strives to supply more
and more things until the product's marginal revenue exceeds the product's price. It signifies
that the producer is in an income-generating stage because it suggests that the producer can
cover its typical variable cost. As a result, he may control the manufacturing process. For any
manufacturer, the profit motive is the last consideration.

Marginal Revenue= Change in Revenue/ Change in quantity

Marginal
Price Output (In Units ) Total Revenue
Revenue

20 1 20 20

18 2 36 16

16 3 48 12

14 4 56 8

12 5 60 4

In the preceding table, it is clear that when the total revenue decreases, the marginal revenue
decreases as well. We should be aware that total sales cannot be zero because neither the rate
nor the quantity produced in the general environment can be zero. However, depending on
the money gained from the creation of each new unit, the marginal revenue may be zero or
even low. The marginal revenue may be zero if the revenue generated at two prices with
exceptional commodities is similar in accounting years. However, if the production technique
is lowered due to internal or external circumstances, and the rate of the commodity likewise
decreases, the revenue era may be reduced. As a result, generating marginal revenue becomes
negative. As a result, the overall sales graph will always be of high quality. However, the
marginal revenue graph can be positive, negative, or even bad.
Conclusion:
The manufacturer's income from the complete production of all units is referred to as total
sales. Because the rate of the commodity and the amount produced by the manufacturer are
multiplied, the total sales can be calculated. The revenue or income that the manufacturer will
receive from generating each more unit is known as marginal sales. Its miles are estimated
after the primary product's production has been completed.

Answer.3a:

Introduction:
Demand is a negative observation about the price, meaning that whenever the price of a
commodity varies, so does its demand. That's an awful deal. The rate elasticity of demand
determines the extent to which that trade is required. The law of demand includes a concept
called price elasticity of demand. It's a crucial advertising exercise for forecasting how
customers will react to a unique stimulus shape. The term "charge elasticity of demand"
refers to the financial dimension of how the amount demanded is affected by changes in its
rate.

Concept and Application:

Elasticity of Demand:
Price When there is a charge alternate, elasticity of demand is an economic concept that is
used to determine the extent to which any alternate has been added up inside the demand of
the product. It's utilised to keep the market balanced, and it also aids producers in producing
only the goods with the least elasticity. It is frequently determined by the type of the
products, such as high-priced commodities, necessary goods, alternative goods, or
complimentary things.
In economics, there are five degrees to which any trade can be delivered in a commodity
demand.
Items that are used or consumed in close proximity to one another are known as substitutes.
Tea and coffee, for example. When the price of tea rises, customers will switch to espresso,
and vice versa.
Complementary items, on the other hand, are goods that can be consumed together, such as
bread and butter. When the price of bread rises, demand for butter may fall, and vice versa.
There are ordinarily five forms of rate elasticity of demand:
1. Unitary Elastic (ed=1)
2. Highly Elastic (ed >1)
3. Highly Inelastic (ed < 1)
4. Perfectly Elastic (ed= infinity)
5. Perfectly Inelastic (ed=0)

In this situation, the price elasticity of demand can be calculated as follows:

When the price is 1, 00,000, the demand is for 5000 units;
When the price rises to 1, 20,000, the demand reduces to 3500 units.
The price elasticity can be computed as:
Ed = % change in Quantity demanded/ % change in price
= (-) 30%/ 20%
= - 1.5

Conclusion:
If you wish to recommend in what quantity the producer should deliver the specified product,
price elasticity of demand serves as a measuring unit in their hands. The horrible sign in the
immediate instance indicates that the demand curve has a negative slope. The ed is -1.5,
which is less than 1, indicating that the product is inelastic in terms of price. A moderate
increase in the charge has resulted in a more significant change in the quantity requested of
the product.

Answer.3b:

Introduction:
The percent trade-in amount provided with the share exchange inside the rate of the
commodity is referred to as supply elasticity. It refers to the responsiveness of the quantity
given to changes in the price of the commodity.
Concept and Application:

Elasticity of supply:
The elasticity of delivery is the proportion of a percent change in the amount supplied to a
percentage change in the price of the commodity. It relates to the quantity provider’s
response to the alternative price of the commodity. It could be calculated as follows:

Es= % change in quantity supplied/ % change in price

The following elements are extremely important in determining supply price elasticity:

1. Production techniques: Organizations' production strategies have a significant

impact on the availability of their products. If businesses adopt the most up-to-date
manufacturing procedures, supply can be more responsive to changes in product
prices.

2. Time Period: It has a significant impact on supply elasticity. For example, due to
different causes such as antiquated production practices, supply elasticity is low in the
short run. As a result, pricing adjustments have no immediate impact on product
supply. When a price remains high for an extended period of time, the supply of
goods increases.

3. Agriculture Products: Agriculture product output cannot be readily raised or

decreased because it is dependent on natural variables such as rain, humidity, and
sunlight. This has a significant impact on the supply of such products, making it
relatively inelastic.

Conclusion:
Elasticity describes how responsive demand or delivery is to the pricing of one's own
product. When a percentage change in the rate of a commodity causes inelasticity in delivery,
the quantity given changes.