SHORT QUETIONS
FROM PREVIOUS PAPER
BUSINESS ECONOMICS1
MCOM FIRST SEM
BUSINESS ECONOMICS1
MCOM FIRST SEM
BUSINESS
ECONOMICS/MANAGERIAL ECONOMICS
DR. SHASHI
AGGARWAL
SECTION C
(30) MARKS
•
EXAMINE THE SALES MAXIMIZATION GOAL OF FIRM
•
EXPLAIN EQUIMARGINAL PRINCIPLE
•
DISTINGUISH BETWEEN EXTENSION OF DEMAND AND
INCREASE IN DEMAND
•
WHAT ARE THE STEPS INVOLVED IN DEMAND
FORECASTING
•
DEFINE THE CONUSMER EQUILIBIRUM
•
WHAT IS PRODUCTION FUNCTION
•
EXPALAIN THE RELATION BETWEEN AC AND MC
•
WHAT IS MEANT BY SHUT DOWN POINT
•
WHAT IS DUMPING
•
WHAT IS PRODUCT DIFFRENTIATION
Q. EXAMINE THE
SALES MAXIMIZATION GOAL OF FIRM
qBAUMOL IN HIS
BOOK BUSINESS BEHAVIOUR,VALUE AND GROWTH” HAS GIVEN TA THEORY OF SALES
MAXIMISATION. MAIN AIM OF A FIRM IS TO MAIMISE THE SALES
qBAUMOL,” THE
SALES MAXIMISATION GOAL SAYS THAT MANAGERS OF FIRMS SEEK TO MAXIMIZE THEIR
SALES REVENUE SUBJECT TO THE CONSTRAINT OF EARNING A SATISFACTORY REVENUE.
qWHEN THE
PROFITS OF FIRM REACH AT CERTAIN LEVEL THE EFFORTS OF MANGER ARE DIRECTED TO
MAXIMISE THEIR SALES REVENUE INSTEAD OF MAXIMISING PROFIT.
qIN ORDER TO
MAXIMISE TOTAL REVENUE BY THE SALES OF GOODS,A FIRM PRODUCES THAT MUCH QUANTITY
WHER MR IS ZERO. IF THE FIRM PRODUCES MORE THAN OUTPUT WHERE MR IS ZERO THAN
ITS TOTAL REVENUE WILL BE LESS THAN THE MAXIMUM
EQUI MARGINAL
PRINCIPLE
qTHIS LAW
STATES INPUT SHOULD BE ALLOCATED FOR USE IN SUCH A WAY THAT THE VALUE ADDED BY
LAST UNIT OF INPUT IS THE SAME IN ALL USES.
qA RATIONAL
DECISION MAKER WOULD ALLOCATE OR HIRE HIS RESOURCES IN SUCH A WAY THAT THE
RATIO OF MARGINAL RETURN AND MARGINAL COST OF VARIOUS USES OF GIVEN RESOURCE IN
A GIVEN USE IN THE SAME.
qMU1/MC1=
MU2/MC2----- MUN/MCN
qMRP1/MC1=
MRP2/MC2---MRPN/MCN
qVMP1=
VMP2---- VMPN
DISTINGUISH
BETWEEN EXTENSION AND INCREASE IN DEMAND
EXTENSION OF
DEMAND:REFRS TO RISE IN QUANITY DEMANDED AS A RESULT OF FALL IN PRICE ,OTHER
THINGS REMAINING THE SAME.
INCREASE IN
DEMAND:- INCREASE IN DEMAND MEANS RISE IN DEMAND IN RESPONSE TO CHANGE IN
DETERMINANTS OF DEMAND OTHER THAN THE PRICE OF THE PRODUCT.INCREASE IN DEMAND
MAY BE
•
A POSITIVE CHANGE IN TASTE AND PREFERENCE
•
INCOME INCREASES IN NORMAL GOODS
•
THE PRICE OF COMPLMENTARY GOODS DECREASES OR
PRICE OF THE SUBSTITUTE INCREASES
•
NUMBER OF BUYER INCREASE
DISTINGUISH BETWEEN INCREASE AND EXTENSION OF
DEMAND
INCREASE IN
DEMAND MEANS
MORE PRICE
SAME DEMAND
SAME
PRICE MORE PURCHASE
3 3
3 4
MORE PRICE
SAME DEMAND
MORE
PRICE SAME PURCHASE
3 3
4 3
D
WHAT ARE THE
STEPS INVOLVED IN DEMAND FORECASTING
qPREDICTING
FUTURE DEMAND FOR THE PRODUCT ON THE BASIS OF PAST EVENT AND PREVAILING TRENDS
IN THE PRESENT.
qSTEPS:-IDENTIFICATION
OF OBJECTIVE
qDETERMINING
THE NATURE OF GOODS
qSELECTION OF
PROPER METHODS
qINTERPRETATION
OF RESULTS
DEFINE THE
CONSUMER’ EQUILIBIRUM
CONSUMER ‘S
EQUILIBRIUM REFERS TO SITUATION WHERIN CONSUMER GETS MAXIMUM SATISFACTION OUT
OF HIS LIMITED INCOME AND HE HAS NO TENDENCY TO MAKE ANY CHANGES IN HIS
EXISTING EXENDITURE.
TIBER
SCITOVOSKY,” A CONSUMER IS IN EQUILIBRIUM WHEN HE REGARD HIS ACTUAL BEHAVIOR
AS THE BEST POSSIBLE AND THE
CIRCUMSTANECS AND FEELS NO URGE TO CHANGE HIS BEHAVIOR AS LONG AS CIRCUSTANCES
REMAIN CHANGED
WHAT IS
PRODUCTION FUNCTION
qPRODUCTION
FUNCTION REFERS TO THE TECHNICAL RELATION BETWEEN THE QUANTITY OF GOODS
PRODUCED(OUTPUT) AND FACTORS OF PRODCUTION( INPUT ) REFERS IS REFERRED TOAS
PRODUCTION FUNCTION.
qKOUTSOYIANSIS,THE
PRODUCTION FUNCTION IS PURELY A TECHNICAL RELATION WHICH CONNECTS FACTOR INPUTS
AND OUTPUTS
qY= f( L,K,S)
qTYPES OF
PRODUCTION FUNCTION
qSHORT RUN
PRODUCTION FUNCTION
qLONG RUN
PRODUCTION FUNCTION
EXPLAIN THE
RELATIONSHIP BETWEEN AC AND MC
AVERAGE COST
IS THE COST PER UNIT OF OUTPUT. IT IS THE TOTAL COST OF PRODUCING ANY GIVEN
OUTPUT DIVIDED BY THE NUMBER OF UNITS PRODUCED
MARGINAL
COST: IS THE INCREASE IN TOTAL COST WHEN OUTPUT IS INCREASED BY ONE UNIT.
MCCONELL: MARGINAL COST MAY BE DEFINED AS THE ADDITIONAL COST OF PRODUCTION OF
ONE MORE UNIT OF OUTPUT.
RELATION
BETWEEN AC AND MC
•
CALCULATED FROM TOTAL COST
•
WHEN AC FALLS,MC IS LESS THAN AC
•
WHEN AC RISES MC IS GREATER THAN AC
•
MC CUTS AC AT ITS LOWEST POINT
WHAT IS SHUT
DOWN POINT
SHUT DOWN
POINT IS THAT POINT AT WHICH THE PRICE IS EQUAL TO AVERAGE VARIABLE COST OR THE
FIRM COVERS THE VARIABLE COST. SUCH A SITUATION ARISE WHEN THE PRICE IS SO LOW
THAT TOTAL REVENUE IS NOT EVEN SUFFICIENT TO COVER THE THE VARIABLE COST OF
PRODUCTION. A FIRM HAS TO BEAR THE FIXED COST. A FIRM THAT SHUTS DOWN AND
PRODUCES NO OUTPUT MAKES A LOSS EQUAL TO ITS TOTAL FIXED COST
LIKE SP= 11
VC=10 AND FC
=5 LOSS IS ONLY 4 RS ON CONTINUATION
SP =10 HERE
THE LOSS IS 5 IT IS SHUT DOWN POINT
SP = 9 HERE
THE LOSS IS 6 AND SHOULD NOT CONTINUE
WHAT IS
DUMPING
ØDUMPING IS A
SPECIAL FORM OF PRICE DISCRIMINATION. SELLING THE PRODUCT IN THE FOREIGN MARKET
AT A PRICE LOWER THAN IN THE DOMESTIC PRODUCT. DUMPING IS RESORTED TO WITH A
VIEW TO ACHIEVE SEVERAL OBJECTIVES:-
•
TO COMPETE OUT RIVALS IN THE FOREIGN MARKET
•
TO TAKE ADVANTAGE OF LAW OF INCREASING RETURNS
•
TO CREATE DEMAND FOR HIS PRODUCTS IN FOREIGN
MARKETS
•
TO GET RID OF THE SURPUS STOCK OF THE PRODUCTS
•
TO TAKE ADVANTAGE OF THE DIFFERENCE IN THE
ELASTICITY OF DEMAND
DUMPING
D
WHAT IS
PRODUCT DIFFERENTIATION
ACCORDING TO
CHAMBERLIN,” A GENERALL CLASS OF PRODUCT IS DIFFERENTIATED IF ONLY SUFFICIENT
BASIS EXIST FOR DISTINGUISHING THE GOODS( SERVICES) OF ONE DEALER FROM THOSE OF
ANOTHER. SUCH A BASIS MAY BE REAL OF FANCIES SO LONG AS IT IS OF ANY IMPORTANCE
WHATEVER TO BUYERS AND LEADS TO PREFERENCE FOR ANY VARIETY OF THE PRODUCT OVER
ANOTHER
SAFFOLA
INTRODUCED BUT CHAMBERLIN DEVELOPED
PRODUCT
DIFFERENTIATION MEANS THE GOODS ARE CLOSE SUBSTITUTE BUT ARE NOT HOMOGENEOUS.
THEY DIFFER IN COLOUR,NAME,PACKING,SIZE AND QUALITY.NAME OR BRAND LEGAALLY
REGISTERED, AIM OF PRODUCT DIFFERENTIATION IS TO INSPIRE THE CNSUMER TO MAKE
DEMAND FOR A PARTICULAR PRODUCT,
Good keep it up
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