Lesson - 1 Business Economics- Meaning‚ Nature‚ Scope and significance Introduction and meaning : (Author : Dr. M.S. Khanchi) Business Economics‚ also called Managerial Economics‚ is the application of economic theory and methodology to business. Business involves decision-making. Decision making means the process of selecting one out of two or more alternative courses of action. The question of choice arises because the basic resources such as capital‚ land‚ labour and management are limited and
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1) Is the assumption that ‘more is better’ satisfied for both goods? 2) What is [pic] for this utility function? 3) Is the [pic] diminishing‚ constant‚ or increasing as the consumer substitutes [pic] for [pic] along an indifference curve? 2. (25 points) A consumer purchases two goods‚ food [pic] and clothing [pic]. Her utility function is given by [pic]. The price of food is [pic] ‚ the price of clothing is [pic]‚ and the consumer’s income is [pic]. 1) What is the
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they maintained without any compromise in taste. This resulted in a shift of the utility curve towards the right‚ whereby consumers got a higher level of satisfaction‚ by consuming products from a bigger brand which believed in far better hygienic procedures (Ref graph). With this in mind‚ they evolved a competitive pricing strategy to survive and grow in the market dominated by smaller players. INDIFFERENCE CURVE ANALYSIS Haldiram’s has a huge product portfolio and sought to customize its products
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Microeconomics Summer 2011 Problem Set 1 Due on July 28th in class TRUE-FALSE (2’*7=14’) （B）1. If good 1 is measured on the horizontal axis and good 2 is measured on the vertical axis and if the price of good 1 is p1 and the price of good 2 is p2‚ then the slope of the budget line is -p2/p1. a. True b. False （B）2. If all prices double and income triples‚ then the budget line will become steeper. a. True b. False （B）3. If Melody has more classical records than rock and roll
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Consumer Expenditure and Equi-marginal Utility Consumer behaviour theory tries to explain the relationship between price changes and consumer demand. Utility is a concept used to denote the subjective satisfaction or usefulness attained from consuming goods and services. This concept helps to explain how consumers divide their limited income / resources among different choices of goods and services that help attain them satisfaction (utility) The issue however is how we are supposed to measure
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substitute (Marginal Rate of Substitution) Slope of indifference curve= the amount of a product that must be substitute for another if utility is to remain unchanged. The ratio is the marginal rate of substitution. The MRS is the slope of the indifference curve at a certain point. I spend my money on the product that gave the most marginal utility. Ex: How much X do I have to give to get an extra unit of Y ? Example of indifference curves= If my MRS does not depend on
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Definitions a diagram devised by F. Y. Edgeworth‚ in the form of a box which plots the indifference curves of two individuals or firms relative to the consumption or production of two goods. The contract curve plotted shows the points where the utility to the two individuals or firms is equal. analytical tool for determining the contract curve used in welfare economics. It is caused by the combination of the indifference curve systems of two exchange partners For this‚ the two systems must be arranged so
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Returns to Scale Meaning An isoquant is a firm’s counterpart of the consumer’s indifference curve. An isoquant is a curve that show all the combinations of inputs that yield the same level of output. ‘Iso’ means equal and ‘quant’ means quantity. Therefore‚ an isoquant represents a constant quantity of output. The isoquant curve is also known as an “Equal Product Curve” or “Production Indifference Curve” or Iso-Product Curve.” The concept of isoquants can be easily explained with the help of the table
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Consider the discussion in the article below on the pricing practices of online travel website Orbitz. Based on discussion and application of the relevant theoretical accounts on this type of pricing policies‚ (1) explain the microeconomic foundations for Orbitz actions‚ and (2) assess their likely sustainability in online retail markets. This essay with address the pricing policies carried out by Orbitz‚ going into detail about the microeconomic foundations for Orbitz actions. This will include
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1. Economies of Scale. If the firms produces in an industry with very high fixed costs‚ consumers can benefit from a large firm which can exploit economies of scale. Economies of scale lead to lower long run average costs and therefore give the potential of lower prices. Example: Would you want several firms providing tap water? Would it make sense to have 2-3 companies laying a network of water pipes and sewage systems across the country? No. It is better to have 1 firm. This is an example of
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