MID TERM ASSESSMENT FALL 2020

Student’s Name_____Saad Maqbool___ Registration Number ______1911299____

Program: BBA, MBA Class/Section: BBA 2B & MBA 72(1), 72 OPEN, 90

OPEN
Course Name: Microeconomics/Business Course Code BA1102
Economics
Instructor’s Museara Instructor’s Museara.bhutto@hyd.szabist.edu.pk
Name: email
Total Marks: 15 Marks Obtained:

Comment: (This Section is for Faculty Use)

Date of Sharing: Wednesday 18/11/2020, Submission IN 2 HOURS,

01:30PM-03:30PM Deadline: 01:30PM-03:30PM

File Type Allowed for submission: (MS Word, MS Excel, pdf, Images, Hand written)

IMPORTANT instructions:
 Read all the questions carefully and then solve in this file, if needed.
 Marks of each question are mentioned at the end of each question.
 Solved Assignment must be mailed to the respective faculty by the due date.
Faculty Signature
 The answer file must be attached in the email.
 Regardless of file type (image or document), email must include attachment for faculty to check.
 Non-submissions of the assignments will be considered as absent for the Final Term and will be marked “0”
on ZABDESK Recap Sheet.
 While checking of the Assignment, SZABIST Plagiarism policy is to be followed.
 Group assignments are not allowed.
_________________________________________________________________________

Q1. Imagine a society that produces technological goods and consumer goods, which we’ll call “Special
Robots cars” and “Rice in tons”
a. Draw a hypothetical production possibilities frontier for “Special Robots cars” and “Rice in tons”. Using
the concept of opportunity cost, explain why it most likely has a bowed-out shape.
b. Show a point that is impossible for the economy to achieve.
c. Show a point that is feasible but inefficient. (3 marks)
Q2: Write short notes on following in your own words. (4)

a. Consider you being a manager, how you see, Utility and law of diminishing marginal utility.
Answer: As a manager utility and law of diminishing marginal utility helps in making market strategies
that could decrease the rate of diminishing marginal utility to provide higher rate of utility on each unit
purchased by the customer to maximize profits. Also it helps analyzing the satisfaction a customer gets
from each unit of product purchased and helps building strategies for sales according to the nature of
product. It also helps determining the correct combination of labor and resources to provide maximum
utility.

b. Consider you being a Production manager, how you see, production costs. (TC, FC, VC, MC).
Answer: Production cost is the cost that a business spends to manufacture a product or provide a
service. It can include all type of expenses like raw material, labor, tool etc. But all expenses are
classified under different type of costs, some are fixed costs and doesn’t every on daily or monthly
basis like rent of the factory and they are known as fixed costs (FC). Other expenses on the other hand
like raw material or labor wages may differ on the quantity of the product being produced. Some days
lesser amount of raw material and less people for labor are needed and may vary according to the
situation, this cost is called variable cost(VC) and should be determined according to the situation if
production to maximize profits and decrease total cost. Total cost(TC) is the total amount of expenses
occurred in order to produce a product or service. It includes the labor, the rent for the factory or office
and all other fixed and variable costs occurred in producing a product. When the capacity of production
is maximized and covers fixed costs then in order to produce extra units of the product you need to buy
and use more resources, the cost of these additional resources in order to increase the quantity of the
product produced is called marginal cost (MC).

c. Relationship between total revenue and elasticity of demand.

Answer: If an increase in price increases total revenue then the demand is inelastic because increase in
price didn’t have a large impact on the quantity demanded. If an increase in price decreases total
revenue then the demand is said to be elastic since the increase in price had a large impact on demanded
quantity.

d. Shifting factors of demand and Supply curve (Show graphs)

 Answer: Demand curve shifter: Any factor that increases the quantity of product purchased at any
given price shifts demand curve to the right and any factor that decreases the quantity of product
purchased at any given price shifts the demand curve to the left.
Supply curve shifter: Any factor that increases the quantity supplied at any given price shifts the
supply curve to the right. For example: price of raw material decreases for the product and now
company can produce 2 units of products at the price of one
Any factor that decreases the quantity supplied at any given price shifts the supply curve to the left for
example: increase in price of raw materials.

Q3: Write your answers by following figure 4. (3 Marks)

a) Which of these graphs shows a negative relationship?

 Answer: Figure 1
b) Which of these figures show a quantity that remains unchanged even when the price changes?
Answer: Figure 3

c) In which of these diagrams is the Q-P relationship positive rather than

negative?
Answer : Figure 2

Q4: Calculate Price elasticity of demand using mid-point method. Interpret your answer (3 Marks)
 Point X: Price of Strawberries = 4 Quantity demand of Strawberries = 120
 Point Y: Price of Strawberries = 6 Quantity demand of Strawberries = 80
Answer: (6-4)/5= 0.4*100 = 40 % change in price
(80-120)/100 = -0.4*100 = - 40% change in demand
Change in demand/ change in price
40/40= -1(price elasticity demand)
Interpret:
Price elasticity demand is negative and it shows that the price elasticity demand is inelastic.

Q5: Calculate the slope of following point. Interpret your answer (2 Marks)
 Point X: Price of Apples = 4 Quantity demand of Apples = 120
 Point Y: Price of Apples = 6 Quantity demand of Apples = 80

Answer: (q2-q1)/p2-p1
Slope =80-120/6-4= -40/2= -20
The slope is negative because the demand decreases when the price increases.