INSTITUTE OF PUBLIC ENTERPRISE

Shamirpet Campus, Hyderabad– 500 101

Post Graduate Diploma in Management (General- Section A & B)

Mid-Trimester Examination,
Trimester– I (Class of 2021-2023)

Economics for Managers

Time: 1.00 Hour Maximum Marks: 15

Section – I (Answer all the questions) (4 X 1 = 4 Marks)

Q.NO QUESTION BTL CO

Q. 1 What is an economic model? 1 1
Q. 2 How is an inverse supply function different from a direct supply 1 1&2
function?
Q. 3 Why do rational people think at the margin? Briefly explain. 1&2 1
Q. 4 Why is a demand curve inelastic for necessity goods? 1&2 1&2

Section No: II (Answer the following) (2 X 3 = 6 Marks)

Q.NO QUESTION BTL CO

Q. 5a Does the opportunity cost of capital influence the estimate of 2&3 1&2
economic profit? Explain using your hypothetical example.
OR
Q. 5b Does the price of the product affect the market power of the firm? 2&3 1&2
Outline and interpret the different measures of market power.
Q. 6a Develop a general demand function and illustrate the change in 2&3 1&2
quantity demanded and change in demand.
OR
Q. 6b Build a market-clearing economic model and demonstrate the district 2&3 1&2
conditions of the market under disequilibrium.
Section – III (Answer the following) (1 X 5 = 5 Marks)

Q.NO QUESTION BTL CO

Q.7a During the hot summer in Hyderabad, people prefer tender coconut 3&4 2&3
as a health drink. For a given demand, the supply of tender coconut
finds its equilibrium in the market. Now, refer to table 1 and answer
the following:
(a) What is the original market equilibrium?
(b) In 2020, the temperature went up to 45-degree Celsius,
increasing the demand for tender coconut by 30% for each
price point. At the same time, it has reduced the supply by
20% for each price point. Calculate the new demand and
supply schedule and find out its corresponding new market
equilibrium condition.
(c) The supply of tender coconut shortened again by 10% for each
price point in the same year. Now, calculate the next new
supply schedule and find out the next new market equilibrium.
(d) Analyze this simultaneous shift in the demand and supply and
identify its effect on price and quantity.
Table 1: Demand and supply schedule of the tender coconut
Price Quantity demanded Quantity supplied
(Rs./unit) (No.) (No.)
5 280 80
10 240 100
15 190 130
20 150 150
25 100 200
30 50 250

OR
Q. 7b The demand for N95 respiratory masks increased for a given supply 3&4 2&3
during the Covid-19 pandemic. Consider table 2 and answer the
following:
(a) Compute the price elasticity of demand (E)
(b) Calculate the Total Revenue (TR) and Marginal Revenue
(MR)
(c) Analyze the relationship between E, MR, and TR.
Table 2: Demand and supply schedule of respiratory masks
Price (Rs./unit) Quantity (No.)
400 0
350 5
200 10
130 14
100 20
70 25