LOVELY PROFESSIONAL UNIVERSITY Form/LPUO/AP-3

Home-Work1
LITCA Department of Management
Name of the faculty member: Baljeet Singh Sani
Course No. ECO 515 Course Title: MANAGERIAL ECONOMICS
Section E17B1/K77B1/K27B1
Max. Marks: 15 Date of Submission: 28/01/2011(28 Jan 2011)

S. no. Roll No. Topic Objectives of Academic Topic Evaluation Details

No. Activity
Each To make the students Each student will attempt all the
student questions given in the assignment i.e.
will understood of basic managerial 15 questions for each student. A test
attempt all will be conduct after submission of
the economic concepts and how assignment.
questions.
these concepts are applied in 1.) There are 5 five marks for
submission.
economic decision making in 2.) Test carries 10 marks
But only those students will be
present day economy allowed to sit in test those who have
submitted their assignments.
(Submission means assignment
uploaded on UMS). 2 questions will
asked in test out of the 15 questions
comprising 5 marks each

Date: Sign.
of Faculty member

Remarks by HOD (Mandatory)

Sig. of HOD with date

Remarks by HOS (Mandatory)

Sig. of HOS with date

 HW 1 ECO 515

1 Agricultural commodities are known to have a price inelastic demand and to be

necessities. Explain why the income of farmer falls (a) after a good harvest and
(b) in relation to incomes in other sectors of the economy.
2 In India, would you expect the price elasticity of demand to be higher for Maruti
SX4 automobiles or for automobiles in general? Why?
3 Why is Managerial Economics becoming such a popular subject of study in
schools and colleges?
4 Would you expect price elasticity of demand for electricity for residential use in
India to be higher or lower then that for industrial use? Why?
5 The government increases income tax from 20% to 25% on salary income. What
impact does this have on demand for consumer goods? Show how equilibrium
price is determined with a demand and supply diagram.
7 Discuss the following statements and critically analyze them. With the help of a
demand and supply diagram.
(1) Protecting American tomato producers from Mexican tomatoes will
lower or increase the price of tomatoes in the United States? Explain with
a demand and supply diagram.
(2) Rapid increase in college tuitions will lower the demand for college.
For each of the following, explain whether quantity demanded changes because
8 of demand shift or price change, and draw a diagram to illustrate your answer.
(1)As a result of decreased military spending, price of army boot falls.
(2) Fish prices fall after the pope allows catholics to eat meat on Friday.
(3) Demand for blankets in Jalandhar rises after an excessively harsh winter.
Would you expect the price elasticity of demand for electricity for residential use
9 in India to be higher or lower than that for Industrial use? Why?
A producer raises the price of his product from Rs. 10 per unit to Rs. 15 per unit.
10 As a result, the quantity demanded and sold by him decreases from 250 units to
200 units. Calculate price elasticity of demand using mid point method.
11 Calculate cross price elasticity of demand between automobiles and petrol at
petrol price of $1 per gallon and sales of cars at 8 million units. What would be
cross price elasticity of demand between automobiles and petrol sales if
automobiles declined from 8 million to 6 million with an increase in petrol price
from $1 to $1.20 per gallon? Use mid point method for your calculations.
Explain the importance of the concept of cross price elasticity of demand in (1)
12 formulating proper price strategy (2) analyzing degree of competition prevailing
in an industry.
Other things being the same what would happen to the supply of a particular
13 product if :
 (a)Price of the product decreases
(b)A technological breakthrough enables the good to be produced at a
significantly lower cost
(c)The price of inputs used to produce the product increases
(d) The price of substitute commodity decreases.

A consumer demands 4000 units of a commodity with an income of Rs 30000. If

14 income decreases to Rs 25000 and demand decreases to 3500 units, calculate
income elasticity of demand.
Rohan consumes two commodities, wheat and rice. The marginal utility derived
15 by him from rice is two and half time the utility derived from the marginal utility
of wheat. If wheat is available for Rs.12 /kg, what price will he be willing to pay
for rice in order to maximize his utility?