Seat No.________________ Enrollment No.

______________
PARUL UNIVERSITY
FACULTY OF MANAGEMENT
Winter 2015-16 Examination
Semester: I Date: 08/01/2016
Subject Code: 06200105 Time: 02:00 PM to 05:00 PM
Subject Name: Business Economics and Environment Total Marks: 60
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Instructions:
1. Attempt all question from each section.
2. Figures to the right indicate full marks.
3. Make suitable assumption wherever necessary.
4. Write separate sections on separate answer sheets.

Section - A

Q.-1 (a) Multiple Choice Questions: (Any three) (03)

1. The price elasticity of demand for color TV’s is estimated to be 2.5. If the
price of color TV’s is reduced by 20percent, how much percentage increase in
the quantity of color TV’s sold do you expect?
a. 25 percent
b. 50 percent
c. 75 percent
d. 100 percent
2. The movement along the demand curve is caused due to:
a. Substitute goods
b. Taste and preferences of the consumers
c. Change in the policy of the government
d. Price of the product
3. Which of the following statements is true?
a. If price elasticity =1, MR=0
b. If price elasticity >1, MR>0
c. If price elasticity<1, MR<0
d. All of the above
4. Price rigidity is one of the features of oligopoly.
a. True
b. False
Q.-1 (b) Definition: (Any three) (03)
1. Equilibrium
2. Marginal Revenue
3. Indeterminate demand
4. Diseconomies of scale

Q.-2 A firm’s fixed cost is Rs. 10. Find out TC, AFC, AVC, AC and MC. Interpret the (08)
relationship between average cost and marginal cost from their curves.
 Quantity TVC
0 0
1 5.15
2 8.80
3 11.25
4 12.80
5 13.75
6 14.40
7 15.05
8 16.00
9 17.55
10 20.00
11 23.65
12 28.80
13 35.75
14 44.80
15 56.25
16 70.40

Q.-3 (a) Is Monopolistic Market efficient in the long run? Explain giving reasons. (04)
Q.-3 (b) What happens when market is not in equilibrium? Explain. (03)
OR
Q.-3 (a) What can you conclude about the price elasticity of demand in each of the following (04)
statements?
a. “The pizza delivery business in this town is very competitive. I’d lose half my
customers if I raised the price by as little as 10%.”
b. “My economics professor has chosen to use the Krugman/Wells textbook for this
class. I have no choice but to buy this book.”
c. “I always spend a total of exactly $10 per week on coffee.”

Q.-3 (b) Using a hypothetical example prepare a demand schedule. Based on the example (03)
draw a demand curve and explain why demand curve slopes downward?

Q.-4 The accompanying table shows the price and yearly quantity sold of souvenir T-shirts (09)
in the town of Crystal Lake according to the average income of the tourists visiting.

Price of T-shirt in Quantity of T-shirts Quantity of T-shirts

rupees demanded when the demanded when the
average tourist average tourist
income is Rs.20,000 income is Rs. 30,000

4 3000 5000
5 2400 4200
6 1600 3000
7 800 1800
 a. Using the midpoint method, calculate the price elasticity of demand when
the price of a T-shirt rises from Rs.5 to Rs.6 and the average tourist income is
Rs. 20,000. Also calculate it when the average tourist income is Rs. 30,000.
b. Using the midpoint method, calculate the income elasticity of demand when
the price of a T-shirt is Rs.4 and the average tourist income increases from
Rs. 20,000 to Rs. 30,000. Also calculate it when the price is Rs.7

Section - B

Q.-1 (a) Multiple Choice Questions: (Any three) (03)

1. Gross National Product is equal to
a. Total output of goods and services in an year
b. Total output – intermediate consumption
c. Total output – savings
d. Total output + total factor payments
2. The liquidity preference is determined by the
a. Transaction motive
b. Precautionary motive
c. Speculative motive
d. All of the above
3. The Phillips curve suggests tradeoff between
a. Economic growth and full employment
b. Unemployment and equality
c. The level of unemployment and price level stability
d. Price level stability and income inequality
4. The declining birth rate has been boon to which of the following sector?
a. Baby products
b. Educational
c. Games and toys
d. Hotels
Q.-1 (b) Definition: (Any three) (03)
a. Suppressed Inflation
b. Business Environment
c. Customers
d. Unemployment

Q.-2 (a) Explain the changes in the Phillips curve in the long run. (05)
Q.-2 (b) Identify whether the following is a part of product flow or service flow in the circular (03)
flow of the economy.
a. Mr. Dhruv pays Rs. 65,000 to B-School.
b. Ms. Kreena buys a Scooty-pep from Downtown.
c. Ms. Prerna gets Rs. 35,000 as her salary from Convent School

Q.-3 (a) Define money. Briefly explain Keynes theory of demand for money and explain what (04)
happens to speculative motive when interest rate in the future rises.
Q.-3 (b) Explain how internal environment affects the functioning of a business firm. (03)
OR
Q.-3 (a) State the various economic policies. (04)
Q.-3 (b) Explain the demographic factors that affect Business environment. (03)

Q.-4 (a) The WPI (2004-05=100) for all commodities increased from 156.1 in 2011-12 to (03)
183.7 in 2012-13. Using price index number, find out the rate of Inflation.

Q.-4 (b) Describe the impact of inflation on Wage Earners. (03)

Q.-4 (c) Illustrate the effect of a rise in government spending on both the short run and long (03)
run Phillips Curves.

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