Full Marks – 80
Time – Three Hours
The figures in the margin indicate full marks for the questions.
1. (a) (i) What is equi-marginal principle? Illustrate how this principle is applied by business managers to allocate the resources. Under what conditions this principle can be applied? 2+7+3=12
(ii) Explain why scarcity is the fundamental economic problem. 4
(b) Critically examine the profit maximisation objective of a business firm. Explain why and how do the managers persue maximisation of firm’s growth rate as an alternative business objective. 8+8=16
2. (a) (i) Why does the demand curve slope negatively? Explain the factors that can shift the demand curve. 2+4=6
(ii) Define market demand schedule with a hypothetical example. Mention the determinants of market demand. 4+3=7
(iii) Distinguish between change in demand and change in the quantity demanded. 3
(b) (i) What is elasticity of demand? Illustrate different types of elasticity of demand with numerical example. 2+10=12
(ii) How can ‘snob effect’ make the demand curve less elastic than otherwise? 4
3. (a) What is demand forecasting? Why is it done? Explain the uses and limitations of opinion-poll method of demand forecasting. 1+3+12=16
(b) Explain the advantages and disadvantages of estimating demand by 8+8=16
1) Consumer surveys.
2) Market experiments.
4. (a) What is transfer pricing? What is its significance? Explain the process of determining the transfer price when the product has no external market. 2+4+10=16
(b) Highlight the salient features of monopolistic competition. Illustrate how a monopolistically competitive firm determines price and output in both short-run and long-run. 4+6+6=16
5. (a) (i) Explain the features of business cycles. Which phase of the business cycle is the most fearsome phase for the business firms and why? 6+6=12
(ii) How can monetary changes cause cyclical fluctuations? 4
(b) Explain how the instruments of monetary and fiscal policies are manipulated to control cyclical fluctuations. 8+8=16