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Business Economics (Retail) - Assignment June 2022
Business Economics (Retail) - Assignment June 2022
Assignment Marks: 30
Instructions:
Students should write the assignment in their own words. Copying of assignments from other
students is not allowed.
Students should follow the following parameter for answering the assignment questions.
TABLE BELOW
Calculate Marginal rate of Substitution and explain the answer. (10 Marks)
Answer:
The marginal rate of substitution is the willingness of a consumer to replace one good for another good, as
MRS (A B) = 5 -3 / 20 – 25
= 2 / -5
= - 0.4
MRS (B C) = 10 - 5 / 16 – 20
= 5 / -4
= - 1.25
MRS (C D) = 18 - 10 / 13 – 16
= 8 / -3
= - 2.67
MRS (D E) = 28 - 18 / 11 – 13
= 10 / -2
=-5
Question 2. Elaborate the term Total Revenue and Marginal revenue also calculate TR and MR in the given
Answer:
Total Revenue:
Total revenue is the amount of money any business generates from selling their products or services during
In this, “P” refers to the price per unit of that product, while “Q” refers to the quantity sold during the period
Marginal Revenue = Change in the Total Revenue / Change in the Quantity of Goods Sold
Question 3.a. From the given Demand Schedule for air tickets, calculate elasticity of demand.
(5 Marks)
1,00,000 5,000
1,20,000 3,500
Answer:
The percentage change in the quantity divided by the change in price is the price elasticity of demand.
given that,
= 13.33
This means that a rise in price results in a commensurate drop in the amount of plane tickets demanded.
3.b. Elaborate the term Elasticity of Supply and explain any three factors that determines elasticity of
supply (5 Marks)
The law of supply shows the direction of transition – supply escalates as price rises. However, the law of
supply does not indicate how much a rise in supply will be registered in response to an escalation in price.
Thus, we need the concept of elasticity of supply to analyze the quantity of such transition. The elasticity of
supply evaluates an organization’s ability to raise or lower production due to the price change of a
commodity.
Ease of storage: A company can escalate its elasticity of supply by stockpiling parts or the final product to
enable it to respond to price increases effectively. However, this flexibility does not favour companies that
Availability of inputs: A company whose inputs are readily available is more elastic than a company that
has to wait or search for inputs. For instance, a hospital may require months to find and negotiate with an
experienced surgeon. On the other hand, a welding services company would hire more workers in a short
period since only fewer skills are required. Thus, the hospitals' supply is more inelastic than the welding
services company.
Time: Time offers flexibility to respond to market transitions; thus, a long-term supply curve provides more
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