Managerial

Economics
BITS Pilani Revendranath T
Department of Management
Pilani Campus
 BITS Pilani
Pilani Campus

MBA ZC416, Managerial Economics

Problems & Solutions
Agenda

• Problems & Solutions on Managerial Economics

BITS Pilani, Pilani Campus

Problems

• Problem #1
• The estimated global supply function for coffee is Q=80+5p.
• The estimated demand function is Q=285-10p-3p s+Y,
• where
• ps = the price in rupees per Kg of sugar, and
• Y is the average monthly income in India.
• The initial price of sugar is Rs.20 per Kg.
• The initial income is Y=35 ( Rs.35,000).
• Using algebra, determine the initial equilibrium price and
quantity of coffee, and
• then determine how price and quantity change if the average
income increases by 15 to Y=50 and the price of sugar
remains constant.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Problems

• Problem #2
• Assume that as in California in USA and other Western
economies, Government of India legalised opioid usage.
• You may be worried about shortage of labour force in
market.
• Use the Supply and Demand diagram to show the e ffects of
opioid use on the labour market equilibrium quantity, which
is the number of workers, L, and the equilibrium price,
which is the wage, w.
• Explain your observations.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Problems

• Problem #3
• Assume that your organisation produces goods/services
for which the supply curve is horizontal and the demand
curve is linear and downward sloping
• Assume that the GST Council of Government of India
increased GST on goods/services you produce by 1%.
• What is the effect of a 1% specific tax collected from
producers on equilibrium price and quantity, and what
share of the tax do consumers pay? Why?

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956