Name Aakash Rathor

Question 1

Write your answer for Part A here.

As the COVID-19 Progressed and kept spreading, Recession was growing and thus the
demand for Oil kept substantially falling. There was a disruption in the Production and Supply
Chain as well. The Phenomena which involves joint-decision making as used by OPEC Is
called as CARTELS / ALLIANCES.

Advantages: Aimed towards the stabilizing the price and also checking the fall in prices of
oil. Adopted from the producers and suppliers view point. It also is used to control the
production levels.

Disadvantages: The consumer pays for these tactics eventually by paying extra as the
production is controlled, therefore there is always a possibility of artificial scarcity of demand
to bump up the prices.

Write your answer for Part B here.

As the world was going through a lock down, the consumption was not as equal to pre-
pandemic times as the demand for oil was falling. This made storing Oil more expensive.
Thus, OPEC decided to cut the supply of Oil.

The desired outcome was to control the falling prices of oil and stabilize it and gradually
increase demand.

Due to the fall in demand for oil, the demand curve shifted to the left and there was no impact
/ change in supply curve before the decision was taken by OPEC. After the Decision, Supply
curve shifted to the left.
Write your answer for Part C here.

OPEC functions in an OLIGOPOLY. This is where a few firms have maximum control.
Interdependence on other players, High Barriers to entry set by the current operators, Firms
prefer to collude rather than compete are some of the key features of an OLIGOPOLY.

Question 2

Write your answer for Part A here.

Business was producing about 92 Articles

Total Profit was 2500 Euros
Assuming the firm operated in a Perfectly competitive market, the Marginal revenue Curve is
a horizontal flat line. MR = Quantity / Total Revenue. (This is 375 Euros)
In a perfectly elastic demand curve, the MR curve is the same as the companies demand curve.
Therefore, to reach a profit maximizing level output, the company should be in a position of
MC=MR.
Journalists=8
Articles=92
Profit=2500 Euros

Write your answer for Part B here.

With the given conditions, we need to fire 6 Journalists. Since, MC = MR is only when Profit
Maximizing level output is achieved.
With only 4 Journalists Employed, the New total Profit is 1500 Euros.
Hiring any number beyond 4, the firm would generate losses. Since, the profit maximization
happens at 250 Euros, this happens only with 4 journalists.
Question 3

Write your answer for Part A here.

While India will be going through a period of recession, it will be experiencing Cyclic
Unemployment because of contraction of demand as a result of negative economic growth.
(This will be because of a fall in aggregate demand) leading to an impact in production levels
and a fall in overall GDP. Further resulting in Job Losses.

Write your answer for Part B here.

Two following two types of recessions could be caused by such a pandemic,

1. Supply Shock Recession
2. Demand-Led Recession.
In case of India, in the beginning we faced supply side recession as production was
stalled/closed. This quickly converted into a demand led recession. This Demand Led
recession was more impacting to our economy and prolonged.

Write your answer for Part C here.

Because of the above two phenomena’s, the aggregate demand and aggregate supply in India
will fall.

Write your answer for Part D here.

When aggregate demand (AD) falls there will be a shift to the left on the AD curve. A
resultant Fall will in GDP and prices.
There will a fall in Aggregate Supply (AS) as well. This can be indicated through a left shift
on the AS curve
Question 4

Write your answer for Part A here.

Effective Fiscal Policy Measures should be Adopted by the Government of India after such a
crisis. As a result of recession, an effective fiscal policy to increase expenditure and reduce
taxation should be undertaken. These are also known as expansionary Fiscal Policies which
promote Aggregate Demand and expenditure.
The Government of India should focus on the 5 below points to maintain the aggregate
demand:
1. Agriculture
2. Daily Wage Labors and Farmers
3. Agriculture
4. MSME
5. Government reforms.

Write your answer for Part B here.

The RBI can adopt various monetary policies towards creating economic stability and
maintaining the aggregate demand. The need for liquidity will be high in the country. In this
regard, RBI can create policies(reduced interest rates, etc) or improve on the Cash reserve
Ratio(CRR) or Statutory Liquidity ratio(SLR)