Manegerial Economics

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QUESTIONS :

1.What are the various factors which may influence the demand for intermediate goods like cables?
Explain the most appropriate method of forecasting the demand for such an item.

2. a) Explain the method of cost-plus pricing and state its limitations. Point out cases where it is suitable. b) Briefly outline the statistical method of estimating cost function.

3. a) Explain the concept of law of diminishing marginal utility with a suitable example. Why is it relevant for managers in taking decisions relating to expansion or diversification?
b) A consumer utility function is U = 1 log x1 + log x2. His budget constraint is given by 2x1 + 4x2 =
36. Find out how many units of x1 and x2 should the consumer buy in order to maximize his utility.

4. Why is demand analysis significant for management? Identify various concepts of demand relevant for various functional areas of management.

5. State the assumption underlying the economists' theory of firm. Develop a critique of the theory and suggest the need for alternative models.

ANSWERS:

1 A )
INTRODUCTION
Marketing practitioners regard forecasting as an important part of their jobs. For example, Dalrymple (1987), in his survey of 134 US companies, found that 99% prepared formal forecasts when they developed written marketing plans. In Dalrymple (1975), 93% of the companies sampled indicated that sales forecasting was ‘one of the most critical’ aspects, or a ‘very important’ aspect of their company’s success. Jobber, Hooley and Sanderson (1985), in a survey of 353 marketing directors from British textile firms, found that sales forecasting was the most common of nine activities on which they reported.
We discuss methods to forecast demand. People often use the terms ‘demand’ and ‘sales’ interchangeably. It is reasonable to do so because the two equate when sales are not limited by supply.
Sometimes it is appropriate to forecast demand directly. For example, a baker might extrapolate historical data on bread

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