Assignment 1 – Fall 2022

Department of Business Administration

Subject: Managerial Economics & Policy Submission Date/Time: 22nd Dec 2022, 11PM
Instructor: Farrukh Wazir Khan Marks: 5 Marks

Instructions

1. Write your answers in a Word / PDF file and upload the file before the due date on Black-
board.
2. Write your name, registration ID and assignment number on the first page of your Word
/ PDF file.
3. Assignment answer scripts can be uploaded on Blackboard any time before due date of
22nd December 2022, time 11 PM. Kindly, do not wait for the last hour to avoid any un-
foreseen problems.
4. Submission of assignment will be considered acceptable through Blackboard ONLY.
Therefore, do not submit your document through email or any other medium.
5. Use 12 pt. font size and Times New Roman font style along with 1-inch page margins.
6. In case of graphs, if drawn by hand, ensure these are clearly labelled and image(s)
copy/pasted to the appropriate answers of assignment document.
7. Do not copy answers from the internet or other sources. Plagiarism, if any, of your an-
swers may be checked through Turnitin.

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 Assignment 1
Managerial Economics and Policy Farrukh Wazir Khan
Total Marks 5

Question 1

As a student of managerial economics define the difference in the following terms and concepts :
A) Study of economics versus managerial economics
B) ‘Profit maximization’ versus ‘Optimal’ decision of a firm
C) Opportunity Cost versus Opportunistic behavior
D) The three questions of ‘economic problem’, faced by a country versus by a company
E) Economic objectives versus non-economic objectives
F) Economic profit versus normal profit
G) ‘Satisfice’ versus ‘principal-agent problem’
H) Explicit cost versus implicit cost
I) Elasticity when demand is price ‘inelastic’ versus Revenues when demand is ‘inelastic’
J) Change in quantity demanded versus change in demand
K) ‘Rationing’ versus ‘Guiding/Allocating’ function of price. Use D/S Model to demonstrate graphically.

Question 2

The theory of managerial economics provides managers with a basic framework for making key business
decisions about allocation of scarce resources.
A) What are the five fundamental questions that managers essentially deal with?
B) What are the types of risks or uncertainty that managers face?

Question 3

A) How do you define and analyze the impact of changing ‘economics of business’?
B) Which are the key factors of change that managers should consider for effective decision making?
C) Explain the ‘four-stage model’ of change observed in a business.

Question 4

Assume supply and demand equations of a product X : Qs = 20 P - 400 and Qd = 1,400 - 10 P

A) Calculate Qs and Qd in a table, assuming prices Rs 20, Rs 40, Rs 60, Rs 80, Rs 100, Rs 120 & Rs 140
B) Plot the demand and supply curves in a clearly labelled D/S model.
C) Determine the equilibrum price and equilibrium quantity algebrically and indicate the equilibrium on
the graph drawn above. At what price do you observe ‘surplus’ or ‘shortage’ in Q? Label graph in (B).
D) Analyze the “initial” impact on the demand and supply model due to following events :
(i) General income of households increases.
(ii) A new technology improves production capacity.
(iii) Price of the product X decreases.
Illustrate the changes in D or S curves, the original equilibrium, price P and quantity Q of product X.

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