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Problem Set

This document discusses three problems related to managerial economics. Problem 1 asks the reader to determine the initial equilibrium price and quantity of coffee given supply and demand functions and then how price and quantity change with an increase in income. Problem 2 asks the reader to use a supply and demand diagram to show the effects of legalized opioid use on the labor market equilibrium. Problem 3 asks the reader to analyze the effects of a 1% increase in GST on a good with a horizontal supply curve and downward sloping demand curve.

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Anirban Bhowmik
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© © All Rights Reserved
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90 views

Problem Set

This document discusses three problems related to managerial economics. Problem 1 asks the reader to determine the initial equilibrium price and quantity of coffee given supply and demand functions and then how price and quantity change with an increase in income. Problem 2 asks the reader to use a supply and demand diagram to show the effects of legalized opioid use on the labor market equilibrium. Problem 3 asks the reader to analyze the effects of a 1% increase in GST on a good with a horizontal supply curve and downward sloping demand curve.

Uploaded by

Anirban Bhowmik
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Managerial

Economics
BITS Pilani Revendranath T
Department of Management
Pilani Campus
BITS Pilani
Pilani Campus

MBA ZC416, Managerial Economics


Problems & Solutions
Agenda

• Problems & Solutions on Managerial Economics

BITS Pilani, Pilani Campus


Problems

• Problem #1
• The estimated global supply function for coffee is Q=80+5p.
• The estimated demand function is Q=285-10p-3p s+Y,
• where
• ps = the price in rupees per Kg of sugar, and
• Y is the average monthly income in India.
• The initial price of sugar is Rs.20 per Kg.
• The initial income is Y=35 ( Rs.35,000).
• Using algebra, determine the initial equilibrium price and
quantity of coffee, and
• then determine how price and quantity change if the average
income increases by 15 to Y=50 and the price of sugar
remains constant.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956


Problems

• Problem #2
• Assume that as in California in USA and other Western
economies, Government of India legalised opioid usage.
• You may be worried about shortage of labour force in
market.
• Use the Supply and Demand diagram to show the e ffects of
opioid use on the labour market equilibrium quantity, which
is the number of workers, L, and the equilibrium price,
which is the wage, w.
• Explain your observations.

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956


Problems

• Problem #3
• Assume that your organisation produces goods/services
for which the supply curve is horizontal and the demand
curve is linear and downward sloping
• Assume that the GST Council of Government of India
increased GST on goods/services you produce by 1%.
• What is the effect of a 1% specific tax collected from
producers on equilibrium price and quantity, and what
share of the tax do consumers pay? Why?

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

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