1.)a.

) Opec is an Oligopoly market structure, if there are few firms in the market and they come
together to take decisions jointly for the price & Product output then this phenomenon is known
as Collusion. Collusion is a way to earn high profits in the market at consumer expenses and
reduce the competition in the market.

Advantages: i.) Restrict competition so that no other player can join and play with the prices ii.)
Increasing the joint profit iii.) More decision making and more control about the market iv.)
Costs of storing as the demand is decreased

Disadvantages : i.) Collusion leads to creation of Monopoly ii.) Competition gone down iii.)Price
will start rising iv.)There is less decision making in terms of quality, quantity & choice.

1.)b.)There are a lot of countries to go on lockdown which caused the demandfor oil and its
prices to fall continiously. The negative demand shock resulted for surplus of oil.As result, OPEC
decided to cut the supply of oil main because of a.) Fall in demand b.) in history never happened
like of over supply , as this resource is rare in our earth. c.) Low prices because of the over supply
Desired out come of them is, is their ability to control or limit the price from falling down further
and another desire is to saving the cost of storage and more stability in the market and having
power for decision making

Demand Curve of the oil:The demand for oil fell due to the lockdowns for which the Demand
curve has a left ward shift(Demand curve shifted towards left)and the prices to fall.
Supply Curve of
the oil :Now OPEC’s took decision to reduce the supply then actually there is in fall in supply,
decision to reduce supply is leftward shift in supply and then the demand increased slightly
picking up in june july month.
Equilibrium: The
equilibrium point shifts down on thesupply curve ,where the new Price equilibrium and
equilibrium quantity meet

Change in demand and Supply Curve before the decision:Duetothe record fall in oil demand, the
demand curve would shift broadly to the left (D2) and supply would remain th same since at this
time, the decision to cut supply was not made

Change in demand & and Supply Curve after the decision:After the decision to cut the supply,the
oil price would slightly increase however, of course not equal to before the pandemic. Thesupply
curve will shift (S1) and the new equilibrium increased the price and slight rightwardshift in the
demand curve (D1) towards the end of the year.

1.)c.) Oligopoly is the market structure does the OPEC operates in

Key features of Oligopoly Market structure is : a.) A Few Firms with Large Market Share (In
oligopoly, there are few large firms.) b.)High Barriers to Entry (The main reason for few firms
under oligopoly is the barriers, which prevent entry of new firms into the industry.) c.)Higher
Prices than Perfect Competition d.) Interdependence (means the action or reaction of one
company may affect the action to others, so they have to very careful while taking decisions) e.)
Indeterminate Demand Curve (Under oligopoly, the exact behaviour pattern of a producer
cannot be determined with certainty. So, demand curve faced by an oligopolist is indeterminate
(uncertain). )

`
2.)a.)
 No. of
No. of Salary:Variable cost(3000 Office rent & Utility Total Cost = Variable cost
articles per per journalist) cost(Fixed cost) + Fixed cost)
Journalists
month

1 15 3000 8000 11000

2 29 6000 8000 14000

3 42 9000 8000 17000

4 54 12000 8000 20000

5 65 15000 8000 23000

6 75 18000 8000 26000

7 84 21000 8000 29000

8 92 24000 8000 32000

9 99 27000 8000 35000

10 105 30000 8000 38000

 Marginal Revenue (MR =
Marginal COST (MC= Change
Total Revenue is Profit or Loss = Change in TR/Change in
375 per article TR-TC in TC/ Change in quantity or Total quantity or the ATC=TC/Q
the articles)
article

5625 -5375 733.33333333

10875 -3125 214.285714285714 375 482.75862069

15750 -1250 230.769230769231 375 404.76190476

20250 250 250 375 370.37037037

24375 1375 272.727272727273 375 353.84615385

28125 2125 300 375 346.66666667

31500 2500 333.333333333333 375 345.23809524

34500 2500 375 375 347.82608696

37125 2125 428.571428571429 375 353.53535354

39375 1375 500 375 361.9047619

 No. of
No. of
articles
Journal
per
ists
month

1 15
2.A) 92 Articles was the business Producing

2500 is the total profit because at this level marginal cost 2 29

equals to marginal revenue and Profit Maximisation takes
place

Profit Maximisation is the level where Marginal Cost (MC) 3 42

becomes euqal to Marginal revenue(MR), and going
beyond this level reduces the profit

Marginal cost will be produce when the change in Total 4 54

cost will be divided equally with change in quantity (i.e.
the articles)

Marginal Revenue will be produces when the change in 5 65

total revenue will be divided equally with the change in
quantity
and as said earlier when marginal costs equals with
Marginal revenue Profit maximisation tooks place and
according to the calculation here the profit maximisation 6 75
tooks place when 8 journalist was there and 92 articles
was produce because at that time MC=MR=375

7 84

8 92

9 99

10 105
 Marginal Marginal
COST Revenue
Salary:Vari (MC= (MR =
Total Cost Total
able Profit or Change in Change in
= Variable Revenue is
cost(3000 cost + 375 per Loss = TR- TC/ TR/Chang ATC=TC/Q
per TC Change in e in Total
Fixed cost) article
journalist) quantity quantity
or the or the
articles) article
3000 3000 3750 750 200

6000 6000 7250 1250 214.28571 250 206.89655

9000 9000 10500 1500 230.76923 250 214.28571

12000 12000 13500 1500 250 250 222.22222

15000 15000 16250 1250 272.72727 250 230.76923

18000 18000 18750 750 300 250 240

21000 21000 21000 0 333.33333 250 250

24000 24000 23000 -1000 375 250 260.86957

27000 27000 24750 -2250 428.57143 250 272.72727

30000 30000 26250 -3750 500 250 285.71429

2.b.) 4 journalists I would have to fire because earlier 8 journalists was
giving me profit maximisation but now only 4 so I will fire the other 4
journalist by keeping consideration for profit maximisation

1500 is the total profit

I have to fire journalist because after profit maximisation the extra

journalist increases just my marginal cose due to which my company is
going to be in loss, so I have to fire the extra journalists
My article values is also decresed comparing to the earlier value, and now if
I will keep on adding journalist to my company which doesnot add any value
to my firm and rather going in loss and shutdown of the company , I have to
take decision at correct time by seeing my profit maximisation in maintain
to benifit my company
Question 3A: What type of unemployment would a country like India experience from such a pande

Cyclical unemployment is the unemployment would a country like india

experience from such a pandemic because Cyclical unemployement is
caused by a fall in aggregate demand which pushes the firms to lower
their production. By which AD(Aggregate Demand) decreases and when
AD decreases, inflation decreases and the unemployment rate increases.
49

AD(Aggregate demand actually depends on(Consumption expenditure), I(Private

investment expenditure) , G(Government expenditure) & the last is the X (Net
exports)which is the difference between imports & exports, and here C+I+G+X=GDP
and if GDP decreases recession occurs and if recession occurs because of slowdown in
Aggregate demand then a large number of unemployement will reflect automaticaly. 55

Assume that for some external factor the aggregate demand curve has shifted
leftwards from AD1 to AD2. This shift brought the economy to a lower level of output.
The horizontal gap between the LRAS curve and the AD2 curve is what is considered to
be cyclical unemployment. 47

For Example : A worker loses her job because the economy begins to enter a recession.
Cyclical unemployment is the short-run fluctuation that occurs as a result of booms and
recessions. 31

Question 3B: What type of recession would be caused by such a pandemic? Provide an explanation.

A recession is also believed to be signaled when businesses cease to expand, the GDP
diminishes for two consecutive quarters, and the unemployment rate rises. 25

Here both Demand shock and supply shock recession would caused for the recession,
but Demand shock recession would be the primary caused by such a pandemic ,
Demand shock is a surprise event that can lead to a temporary increase or decrease in
demand for goods or services. An example of a negative demand shock would be a
global pandemic. An example of a positive demand shock would be government
stimulus checks and relaxed monetary policy in response to the pandemic. but here
negative demand shock has occured in this decision 91

In this respect, the Great Depression occurred mostly because of a negative shock to
the aggregate demand curve, not the aggregate supply curve.Consumers become
worried about job loss and buy fewer goods and services than expected. 36

Question 3C: What would happen to the aggregate demand and aggregate supply in India because o
AD is the total aggregate quantity or output that is willingly bought at a given level of
prices and AS(aggregate supply( is the total supply of goods & services produced in an
economy. A larger affect in aggregate Demand(AD) has took place in India in Covid 19
situation
48

To know about any country's growth or GDP we have to look out for 3 factors that is
Output, employement and inflation and when there is recession then the definitely
output will go down and the unemployement numbers will go up 41

There was a fall in aggregate demand in left ward shifts from AD2 to AD1 and because
of there is a recession and aggregate demand shifted towards left , there we have
fallen in the output from Y2 to Y1(GDP went down) it has also lowered the prices which
came from P1 to P2, so here the main driver of this recession is the AD(aggregate
Demand) due to which fallen in price & output took place, and if there is a aggregate
supply shock recession takes place , then left ward shift supply takes place becase of
which it is lowering the growth , even if it is a supply also, the GDP gone down, but
here in supply recession the price will increase. 124
Decrease in Price led Demand led recession and Increase in price led Supply led
recession. 15

Question 3D: How will the AD/AS curves behave in this situation? Please elaborate your answer. (2

In this situation AD (Aggregate demand) curves shifts towards the left ward shifts
because of which the output will get affected and in a fallen state it will be and the
price will also be decreased which creates the scenario of Demand led recession and
when we talks about the AS(Aggregate Supply) curves shifted towards leftwards in
this situations then output will fall but the prices will increase drastically like anything
which will led the Supply led recession. GDP is going to fall in both the cases. 87
Decrease in Price led Demand led recession and Increase in price led Supply led
recession. 15
nce from such a pandemic? Please provide an explanation.

rovide an explanation. (2 marks)

pply in India because of the above two phenomena? Elaborate your answer. (2 marks)
borate your answer. (2 marks)
Question 4A: What type of macroeconomic policy should the Indian government adopt after such a
policy measures to be undertaken clearly with explanations. (3 marks)

Fiscal policy should be adopt by Indian government after such a crisis.There are only two tools under Fiscal policy, one is the ta
expenditure, which means Government has the power the right to tax on people and government has the power to spend, the
fiscal policy, For example if there is a recession and people are not coming out from their houses, not borrowing, not doing an
want to do any extra investments, so basically there is less money is flowing in the system, now the goverment will say this typ
the economy, LESS MONEY= LESS ECONOMIC ACTIVITIES so at that time goverment will apply less tax on people and do the
recession, it will reduce the taxation.
Increase in Expenditure and decrease in taxation is part of expansionary Fiscal policy, which basically adopted during recession
monetorium, in these ways government will try to put the money back in the publics hand to increase the economy.

Government has to more focus on expansionary Fiscal policy to rectify the resesion and to grow the economy again, for examp
the GARIB KALYAN YOJNA : The Pradhan Mantri Garib Kalyan Yojana / Package is a comprehensive r
Lakh Crore Yojana for the poor to help them fight the battle against Corona Virus. This was an
2020, to reach out to the poorest of the poor, with food and money in hands, so that they do n
buying essential supplies and meeting essential needs.
The two major examples of expansionary fiscal policy are tax cuts and increased government spending
intended to increase aggregate demand while contributing to deficits or drawing down budget surpluses.

Question 4B: What type of macroeconomic policy should the Reserve Bank of India adopt after suc
the policy measures to be undertaken clearly with explanations. (4 marks)

Monetory Policy should the Reserve Bank of India should adopt after the crisis

Monetory Policy is policy under which the actions undertaken by a nation's central bank to control money supply and achieve
keep unemployment low, and maintain foreign exchange (forex) and inflation rates in a predictable range.

Monetary policy can be broadly classified as either expansionary or contractionary.

The tools which the central bank uses are : Open market operations, CRRs, Direct lending to banks, Bank reserve requirements
lending programs, QE, and managing market expectations.
The Idea here for the RBI is to control the liquidity, a constan money flow to sustain the economy to run it in a smooth manne
we don't need less then adequant, we don't need more than adequant, lets take an example that there is a recession and less
now the RBI will say to increase the liquidity, they will use the tool to increase the liquidity are like OMO(Open Market Operati
of the treasury bills and government securities by the central bank of any country in order to regulate money supply in the eco
(CRR) is the share of a bank’s total deposit that is mandated by the Reserve Bank of India (RBI) to be maintained with the latte
liquid cash. Direct lending is a form of corporate debt provision in which lenders other than banks make loans to companies w
investment bank, a broker or a private equity firm. Reserve requirements are the amount of funds that a bank holds in reserv
meet liabilities in case of sudden withdrawals.
RR(Repo Rate) : The Rate at which RBI lends to commercial banks
RRR(Reverse Repo Rate) : The rate at which the RBI borrows from the commercial banks
144

42

97

33

13

48

30
207
12
15