Managerial Economic

Dr. Lamees El Araby

Final Exam

By:
Ahmad Zakaria Hassan Kotp
Arab Academy for Science Technology and Maritime Transport

Course Name: Managerial Economics

Final Exam
Open Book Exam

Answer the following Questions:

Question 1:

i. What can you conclude about the Price Elasticity of demand in

each of the following 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%"

Elasticity of Demand = 50% ÷ 10% = 5 < 1 Elastic Demand

b. My economics professor has chosen to use the Krugman/Wells

textbook for this class. I have no choice but to buy this book.”

Elasticity of Demand = 0 Perfectly Inelastic Demand

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ii. Do you think the price elasticity of demand for Ford sport-utility
vehicles (SUVs) will increase, decrease, or remain the same when
each of the following events occurs? Explain your answer briefly

a. Other car manufacturers, such as General Motors, decide to make

and sell SUVs

- The closer the substitutes for a good or service, the more elastic is the
demand for the good or service.
- The price elasticity of demand will increase

b. Due to ad. campaigns, Americans believe that SUVs are much safer
than ordinary passenger cars.

- Due to the American believe that SUVs are much safer, the demand
increased but the price remain the same as SUVs not

- The price elasticity of demand remains the same

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Question 2
Select and name a market of any well-known product, draw its
market diagram, state and name four different factors that might
cause changes in equilibrium price and quantity.
The Product: Oriental Grill Restaurant in Egypt
The Market Type : Monopolistic Competition Market

- A monopolistically competitive firm is an intermediate case between

monopoly and competition.

- The demand curve as a monopolistic competitor face is not flat, but rather
downward-sloping, which means that the monopolistic competitor can raise
its price without losing all of its customers or lower the price and gain more
customers.
- Since there are substitutes, the demand curve facing a monopolistically
competitive firm is more elastic than that of a monopoly where there are no
close substitutes.
- Equilibrium in a market occurs when the (Price) balances the plans of buyers
and sellers (Quantities).

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Arab Academy for Science Technology and Maritime Transport

Factors that might cause changes in equilibrium price and quantity:

Factors Affecting on Demand
a. Expected Future Price:
Increase in meat prices by the beginning of Next Month.

b. Preferences
Because of Month of Ramadan, most people gather for Iftar in restaurants.

Factors Affecting on Supply

c. The prices of factors of production
Increase in meat prices.

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d. State of nature
Covid-19 Restrictions.

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Arab Academy for Science Technology and Maritime Transport

Question 3

"The International Monetary Fund has put some conditions to

address Monetary, Fiscal and Structural problems that faced the
Egyptian economy."
Discuss the last sentence, addressing the main problems at the Egyptian
economy, and Egypt Compliance with the conditions, under IMF extended
Fund Facilities.

The main problems at the Egyptian economy 2016:

1. Overvalued exchange rate.
2. foreign exchange scarcity which severely undermined private
sector activity
3. A dramatic drop in foreign exchange reserves
4. Large fiscal deficits.
5. High level of public debt

The three-year $12 billion IMF loan reform agenda focused on three key areas:
1. Monetary:
Egypt was to transition to a flexible exchange-rate regime and contain inflation. this
entailed floating the Egyptian pound (EGP).
The Egyptian government limited dollar transfers abroad
Inflation, which had fluctuated within a range of 8-15 percent between 2011 and 2016,
rose to 22 percent in December 2016, Inflation in Egypt remained above 30 percent for
much of 2017

2. Fiscal:
The country was to reduce public debt by cutting fuel subsidies “in June 2017 fuel prices
increased by up to 50 percent” while expanding spending on vulnerable groups like youth
and women.
reducing government spending, including on subsidies, and boosting revenues.
reduced public sector expenditures, the public sector wage bill has seen a consistent
annual decline as a percent of GDP from 8.1 in 2014/15 to 5.3 in 2017/18

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to increase revenue, the government introduced a value-added tax (VAT) and new fees, in
addition to selling telecom licenses and land.

3. Structural Problems
Egypt was to streamline industrial licensing, provide financing to small and medium-sized
enterprises (SMEs), decriminalize insolvency, and simplify bankruptcy laws At the
insistence of Managing Director Christine Lagarde, the IMF agreement included measures
to support women and children through increased funding for daycares and school meals,
combined with policies aimed at making public transportation safer and more accessible
for women.

Real GDP growth

Inflation rate

Unemployment rate

Good Luck ☺
Dr. Lamees El Araby

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