Answer: An indifference curve may be defined as the locus of points, each representing a different combination of two goods but yielding the same level of utility or satisfaction. Since each
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School
for Continuing Education (NGA-SCE)
Course: Business
Economics
Internal
Assignment Applicable for April 2019 Examination
1. What are the
important characteristics of an indifference curve. Suppose a consumer’s
disposable income is Rs. 5,000/- per week and she has a choice of spending the
income on concerts and meals. Assume meal is available for Rs.250/- each and
concerts are available for Rs.500/- each. Prepare a table of possible combinations
of meals and concerts that could be bought with the income. What is your
observation about the values in the table?
Answer: An
indifference curve may be defined as the
locus of points, each representing a different combination of two goods but
yielding the same level of utility or satisfaction. Since each
2. Find below
the data for price elasticity and income elasticity of demand for 5 different
commodities. Interpret the values in the table in the light of
·
Whether the
demand is elastic or inelastic for each of the commodities and why
·
What do you mean
by negative income elastic demand in case of commodity 3
·
Give example for
each type of commodity.
Commodity
|
Price
Elasticity of demand
|
Income
elasticity of demand
|
1
|
-0.3
|
+0.6
|
2
|
-1.45
|
+5.60
|
3
|
-5.09
|
-1.67
|
4
|
-0.7
|
+0.8
|
5
|
1.0
|
1.0
|
Answer: i)
Commodity
|
Price
Elasticity of demand
|
Reason
|
1
|
-0.3
|
If
Ped < 1 demand is inelastic for the goods i.e unresponsive to change in
price.
|
3 a) “Different
prices can be charged by the producer in the different market segments to maximize
revenue.” Explain the statement by taking a case of aviation industry.
3 b) What do you
mean by price rigidity? Which type of market structure is characterized by the
price rigidity? Explain your views taking an example of industry facing the problem
of price rigidity.
Answer: Price Discrimination under Monopoly
The
theory of pricing under monopoly, gives the impression that once a monopoly
firm fixes up the price of its product, the same price is charged from all the
consumers. This however may not be the case. A monopolist, simply by virtue of
its monopoly power, is capable of charging
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