Business Economics Assignment

A1) To calculate marginal rate of substitution of the data :-

A to B = Change in Y / Change in X
= 3-5 / 25-20 = -2 / 5 ( since we are calculating change we can ignore the negative sign)
= 2 / 5 = 0.4

B to C = 5-10 / 25-20 = -5/4

C to D = 10-18 / 16-13 = -8/3

D to E = !8-28 / 13-11 = -10/2

Therefore MRS = A - -, B - 2.5, C - 0.8, D - 0.375 , E - 0.2

It implies that to increase quantity of one good an individual has to let go off some units of another
good. In the above example in order to increase units of good Y, some units of good X are to be
given up.  MRS= -| ∆Y/ ∆X |. However, MRS increases at diminishing rate i.e. less and less unit of
X will be given up to procure more and more units of Y.

A2)

• Total Revenue is measured to keep track of how much money is your organisation making in total
after excluding expenses.
• Total revenue is also known as Gross revenue thru all of your revenue streams ie, the total amount
of income your organisation generates for a determined period of time by selling your products/
ideas.
• Total revenue is very important for your organisation as it determines whether your company is
loosing money or earning money/growing.
• Total revenue is calculated by the formula;

Total Revenue = Number of Products Sold * Price per Product

• Marginal Revenue is considered as the increase in revenue when one additional unit is sold from
the rest of the pack.
• Marginal Revenue can be constant or not as it greatly depends on the sale and production of
items/goods.
• A company analyses marginal revenue when they want to know what the revenue is from its
newer products than the rest of the products.
• Helps in Cost-Benefit Analysis for a company.
• Marginal Revenue is calculated by the formula;

Marginal Revenue = Change in Total Revenue / Change in Total Output Quantity

B ) Total Revenue = Number of Units Sold * Cost Per Unit

= 20 * 1 = 20
= 18 * 2 = 36
= 16 * 3 = 48
= 14 * 4 = 56
 = 12 * 5 = 60

Marginal Revenue = Change in revenue / Change in Quantity

= 20
= 16
= 12
=8
=4

A3)

A) Elasticity of Demand = % Change in Quantity / % Change in Price

= 1,20,000 - 1,00,000 / 5000 - 35000

= 20,000 / 1500
= 13.33

This means that a rise in price results in a commensurate drop in the amount of plane tickets de-
manded.
B)

• The Term Elasticity of Supply simply means that if a price of a product increases the quantity
supplied of the product will also increase, where as when the price of the product decreases then
the quantity supplied of the product will also decrease.
• Both the price and the quanta supplied of the product are directly co related to one another.
• Elasticity of Supply also helps us understand 1 important thing about a country and that is its im-
port and export capability and also it's GDP.
• The degree of extent in the amount provided of a product because of its progress in the price of
the item is known as the elasticity of supply.
• An elastic demand or elastic supply is one in which the elasticity is greater than one, indicating a
high responsiveness to changes in price. An inelastic demand or inelastic supply is one in which
elasticity is less than one, indicating low responsiveness to price changes.

3 Factors that determine the elasticity of supply are:-

I. Nature of a Good:- this acts as a significant determinant that impact the flexibility of supply.
Products, like collectibles and old wines, can't be repeated in a similar structure; in this way, the
stockpile of such merchandise stays steady. Also, in the event of short-lived merchandise like
vegetables, organic products, and different eatables, the stockpile would be inelastic. This is on
the grounds that the stockpile of short-lived products can't be expanded or diminished without
any problem. In actuality, in the event of solid merchandise, for example, furniture and electric
machines, the stockpile would be flexible as their inventory can be expanded or diminished
rapidly.

II. Time Period:- Affects the elasticity of supply to a larger extent, In the short-run, elasticity of
supply is low while over the long haul versatility of supply is more. Hence, changes in costs
don't influence the stock of a decent right away. On the off chance that the cost stays high for a
more extended period, just providers like to expand the inventory of item.

III. Scale of Production:- Puts a critical effect on the versatility of supply. In the event of limited
scope creation of products, the stockpile would be inelastic as well as the other way around. For
instance, on the off chance that an association has an enormous scope creation of cleansers, an
expansion in the cost of cleansers would expand the stock of cleansers with next to no delay.