MB0042 – Managerial Economics Fall drive 2011

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Master of Business Administration - MBA Semester I
MB0042 – Managerial Economics - 4 Credits
(Book ID: B0908)
Assignment Set- 1 ( 60 Marks)
Note: Each question carries 10 Marks. Answer all the questions.
Q.1 Price elasticity of demand depends on various factors. Explain each factor with the help of an example.
 Ans:
The concept of price elasticity of demand is commonly used in economic literature. Price elasticity of demand is the degree of responsiveness of quantity demanded of a good to a change in its price. Precisely, it is defined as:

"The ratio of proportionate change in the quantity demanded of a good caused by a given proportionate change in price".

The formula for measuring price elasticity of demand is:

Price Elasticity of Demand = Percentage in Quantity Demand XPercentage Change in Price

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Q.2 A company is selling a particular brand of tea and wishes to introduce a new flavor. How will the company forecast demand for it ? 

Q.3 The supply of a product depends on the price. What are the other factors that will affect the supply of a product. 

Q.4 Show how producers equilibrium is achieved with isoquants and isocost curves. 

Q.5 Discuss the full cost pricing and marginal cost pricing method. Explain how the two methods differ from each other. 

Q.6 Discuss the price output determination using profit maximization under perfect competition in the short run.


Master of Business Administration - MBA Semester I
MB0042 – Managerial Economics - 4 Credits
(Book ID: B0908)
Assignment Set- 2 (60 Marks)
Note: Each question carries 10 Marks. Answer all the questions. 

Q.1 Income elasticity of demand has various applications. Explain each application with the help of an example. 

Q.2 When is the opinion survey method used and what is the effectiveness of the method.

Q.3 Show how price is determined by the forces of demand and supply, by using forces of equilibrium. 

Q.4 Distinguish between fixed cost and variable cost using an example.

Q.5 Discuss Marris Growth Maximization model and show how it is different from the Sales maximization model. 

Q.6 Explain how fiscal policy is used to achieve economic stability.

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Q. 2 Explain the role of marketing research in “decision –making” process.

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The task of marketing research (MR) is to provide management with relevant, accurate, reliable, valid, and current information. Competitive marketing environment and the ever-increasing costs attributed to poor decision making require that marketing research provide sound information. Sound decisions are not based on gut feeling, intuition, or even pure judgment.

Marketing managers make numerous strategic and tactical decisions in the process of identifying and satisfying customer needs. They make decisions about potential opportunities, target market selection, market segmentation, planning and implementing marketing programs, marketing performance, and control. These decisions are complicated by interactions between the controllable marketing variables of product, pricing, promotion, and distribution. Further complications are added by uncontrollable environmental factors such as general economic conditions, technology, public policies and laws, political environment, competition, and social and cultural changes. Another factor in this mix is the complexity of consumers. Marketing research helps the marketing manager link the marketing variables with the environment and the consumers. It helps remove some of the uncertainty by providing relevant information about the marketing variables, environment, and consumers. In the absence of relevant information, consumers' response to marketing programs cannot be predicted reliably or accurately. Ongoing marketing research programs provide information on controllable and non-controllable factors and consumers; this information enhances the effectiveness of decisions made by marketing managers.

Traditionally, marketing researchers were responsible for providing the relevant information and marketing decisions were made by the managers. However, the roles are changing and marketing researchers are becoming more involved in decision making, whereas marketing managers are becoming more involved with research. The role of marketing research in managerial decision making is explained further using the framework of the "DECIDE" model:

The DECIDE model conceptualizes managerial decision making as a series of six steps. The decision process begins by precisely defining the problem or opportunity, along with the objectives and constraints. Next, the possible decision factors that make up the alternative courses of action (controllable factors) and uncertainties (uncontrollable factors) are enumerated. Then, relevant information on the alternatives and possible outcomes is collected. The next step is to identify and select the best alternative based on chosen criteria or measures of success. Then a detailed plan to develop and implement the alternative selected is developed and put into effect. Last, the outcome of the decision and the decision process itself are evaluated.

What is the Role of Research? Managers and CEOs often want to base their brand decision on measurable market research. So, how much market research should you do? Research can never give you all the answers, but it can be effectively used to understand how target audiences might receive a new idea, or to find a new market opportunity.

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