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Business Economics
1. Assume that a consumer consumes two commodities X and Y and makes five combinations for the two commodities:
TABLE GIVEN BELOW
| Combination | Units of X | Units of Y |
| A | 25 | 3 |
| B | 20 | 5 |
| C | 16 | 10 |
| D | 13 | 18 |
| E | 11 | 28 |
Calculate Marginal rate of Substitution and explain the answer. (10 Marks)
Ans :
The Marginal Rate of Substitution can be defined as the rate where a customer is prepared to forget several suitable X units for one more good Y at the same time.
2. With the help of the concept of production function. Briefly explain the Law of Variable Proportions and Law of Returns to Scale. Elaborate your answer by citing real world examples. (10 Marks)
Ans :
The laws of production tell us about the technical ways that are possible and can be used to increase the level of production. There are various ways in which output can be increased. One way is changing all the factors
3. a. Calculate the elasticity of demand for the following data: (5 Marks)
When the price is Rs 20 per unit, demand for a commodity is 500 units. As the price falls to Rs15 per unit, demand expands to 800 Units
Ans :
A measure of the consumer response to a change in a product’s cost lies in price elasticity of demand. The more general term demand elasticity tests the impact of a shift in different variables, including the
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