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

10P = 7000
P = 700.
If the govt. imposes a sales tax of Rs.200 per unit
Qs = 3,000 + six (P – 200)
= 3,000 + 6P – 1200
= 1800 + 6P.
?Equilibrium price is determined, when Qs = Qd
? 1800 + 6P = 10,000 – 4P
6P + 4P = 10,000 – 1800
10P = 8200
P = 820
? change in Price = 820 – 700 = Rs.120
(Hence the price will increase by Rs. 120)
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14. E I. Is actual. Consumer surplus is useful to the government to fix taxes. It is useful
to fix taxes since the rich or the upper class people have more consumer
surplus compared to the rest. Consumer surplus also reveals the purchasing
trend of the economy. By observing the nature of the products moving in
the market, the government can fix the taxes through the classification of
products.
II. Is actual. Consumer surplus helps the monopolists in fixing price of a
commodity.
While pricing a commodity, if a monopolist considers consumer surplus, he
can retain the customer for a longer period.
III. Is not actual. In case of imported products which are cheaper than domestic
products the consumer surplus is more. This is because he is paying
less for the imported product which is giving him the identical level of
satisfaction.
IV. Is actual. A higher consumer surplus shows that the economy is stable and
vise versa. A negative consumer surplus shows that the economy is not
functioning efficiently.
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15. C The income effect refers to the effect of a change in the price of a product on the
consumer’s purchasing power. If the price of a product decreases, the consumer is
left with a few money that can be used for purchasing additional units of the identical
product or a various product. This means that his real income has increased. The
income effect rule says that a reduce in price of a commodity leads to an increase
in volume demanded.
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16. B A consumer with a provided income will find maximum utility when the marginal
utility of every commodity is in the identical ratio to its price. Suppose there are two
products x and y. MUx represents the marginal utility of x and MUy that of
product y. Now if the value of MUx/Px is more than MUy/Py, the consumer will
substitute product x for product, this substitution will continue on till the marginal
utility of both the product in ratio to their respective prices are equal.
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16
ans cause

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