All India Management Association (AIMA) 2007 M.B.A Marketing Management Business Economics – I - Question Paper

year are fixed.
II. Is an assumption of PPC.
III. Is an assumption of PPC.
IV. Is not an assumption because technology is fixed during the year.
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2. E According to general equilibrium analysis Decision making agents are
Consumers.
Producers.
Resource owners.
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3. D If the institute believes that raising course fees will enhance revenue, it can happen
only if the demand for the course is inelastic. This implies that as a outcome of an
increase in price, the demand for the course do not fall, which helps in increasing
revenue.
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4. E The value of cross-price elasticity for 2 complementary products is negative,
because change in price of 1 product causes opposite change in the volume
demanded of the other product.
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5. E When the value of elasticity of supply is less than 1 but greater than zero, it is
known as relatively inelastic supply.
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6. B When a unit tax is imposed this will reason the supply curve to shift left ward. < TOP
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7. A If the demand curve is perfectly inelastic, the price rises by the full amount of the
tax and the supply remains unchanged. The entire tax is borne by the customers.
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8. E At equilibrium, Qs = Qd
2000 – 450P = 800P – 3000
5000 = 1250P
P = 4.
When P = 4,
Qs = (800 x 4) – 3000
Qs = 200
Elasticity of supply =
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9. B Price elasticity of demand = ?Q/?P ? P/Q
provided P = 8
Demand function: P = 40 – 4Q
Or, 4Q = 40 – P
Or, Q = 10 – 0.25P
Or Q = 10 – 0.25(8) = 10 – two = 8
Thus, ?Q/?P ? P/Q = -0.25 ? 8/8 = -0.250.
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10. B Qs = 500P – 500
Qd = 1150 – 50P
Equilibrium price is determined when Qs = Qd.
? 500P – 500 = 1150 – 50P
or, 550P = 1650
or, P = 3
When P = 3, Qs = 500(3) –500 = 1500 – 500 = 1,000 units.
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11. B The theoretical highest price that can prevail in the market is when the volume
demanded is zero.
12,00,000 – 40 P = 0
12,00,000 = 40 P
P = = Rs. 30,000.
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12. E P1 = eight Q1 = 40
P2 = 10 Q2 = 60
?P = two ?Q = 20
EPd = 1.80
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13. C Qd = 10,000 – 4P
Qs = 3,000 + 6P
Equilibrium price is determined where,
Qs = Qd
3,000 + 6P = 10,000 – 4P
6P + 4P = 10,000 – 3,000

Earning:   Approval pending.