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Business Economics
April 2021 Examination
Ques1. What do you mean by demand Forecasting? Enumerate the limitations of demand forecasting (10 Marks)
Ans1.
Introduction
Demand is the need and want of a commodity combined with the ability and willingness to pay, which is the maximum amount that a buyer is willing to pay for any goods or services. Demand forecasting is a process of estimating the demand of any existing product or a new product through various measures. Forecasting can be done on any product, be it a new product or an existing established product, but it is a notable feature that forecasting of both kinds of products is entirely different in terms of process. It is so because, for an established product, one has the requisite past statistics, but for a new product, everything will be done on an estimation basis since there is no availability of any
Ques 2. Complete the hypothetical table below and explain in brief, the behaviour of each type of cost.
| Quantity | Total Fixed Cost | Total Variable Cost | Total Cost | Average Fixed Cost | Average Variable Cost | Average Total Costa | Marginal Cost |
| 0 | 100 | 0 | |||||
| 1 | 100 | 25 | |||||
| 2 | 100 | 40 | |||||
| 3 | 100 | 50 | |||||
| 4 | 100 | 60 | |||||
| 5 | 100 | 80 | |||||
| 6 | 100 | 110 |
Ans:
Introduction
It is a known fact that physical inputs are required in order to produce goods and services and to enhance production as a whole. However, these physical inputs and outputs bring with themselves a financial concept of cost. Cost is basically the value of goods and services. It is the value that is charged from the customer in exchange for goods and services. It is referred to as the monetary value of all goods and services that the consumers and producers purchase. The concept of cost can be broadly classified into two heads of fixed and variable costs on the basis of the nature of costs and total,
Ques 3a. Assume that a business firm supplied 450 units at price Rs 4500.The firm has decided to increase the price of the product to Rs 5500. Consequently, the supply of the product is increased to 600 Units. Calculate the elasticity of supply. (5 Marks)
Ans 3a.
Introduction
The elasticity of supply is the ratio of % change in quantity supplied with respect to % change in price over a period of time. It is measured in order to identify the responsiveness, or elasticity, of the quantity supplied of goods and services to the change in price. Elasticity is calculated not only with respect to the price of the commodity but also with respect to other detriments of supply.
Concept and application
Ans 3b.
Introduction:
Price Elasticity of demand is the ratio of % change in quantity demanded with respect to % change in price over a period of time. It is measured in order to identify the responsiveness, or elasticity, of the quantity demanded of goods and services to the change in price. Elasticity is calculated not only with respect to the price
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