# Pokhara University || Spring,2016 || Introductory Microeconomics || BBA\BCIS

This is the question set along with answers of Introductory Microeconomics  Spring 2016, which was taken by the Pokhara University.

POKHARA UNIVERSITY – Introductory Microeconomics Spring 2016

Level: Bachelor                                               Semester: Spring                          Year:2016

Programme: BBA/BBA-BI/BCIS/BHCM/BBA-TT                                             Full Marks: 100

Course: Introductory Microeconomics, Spring 2016                                               Pass Marks: 45

Time: 3 hrs

Section “A”

Very Short Answer Questions

Attempt all questions.

1. What is meant by scarcity in economics?
2. Define market supply schedule and curve.
3. Define the market equilibrium price and output from the demand and supply functions:                Qd = 100-20P and Qs = 10+40P.
4. What is the income elasticity of demand?
5. Why is isoquant convex to the origin?
6. Define economies of scale.
7. Why AR and MR curves are horizontal straight line in perfect competition?
8. Point out the features of oligopoly.
9. What are the elements of gross profit?
10. List out the four causes of wage differentials.

The answers to the above 10 questions.

Section “B”

Attempt any six questions:

11.  Scarcity and choice are the central problems of economics. Explain.

12. Given the following demand and supply functions: Qd = 100-5P and Qs = 10+ 5P

 Price (in Rs) Quantity demanded: Qd = 100-5P Quantity supplied: Qs = 10+ 5P 0 1 3 5 7 9 11 13 15 20

a) Derive the market demand schedule and market supply schedule.

b) Derive the market demand curve and market supply curve.

c) Find out the equilibrium price and quantity mathematically.

13. Define price effect. How is it decomposed into income and substitution effect for normal goods?

14. Explain the law of variable proportion. Which stage of production does a rational producer choose?

15. A monopolist faces following demand and cost function.

P= 100-Q

C= 25+10Q+2Q2

Find the price and output that maximize profit for the firm.

16. Define monopolistic competition. Explain how price and output are determined under it in the short run.

17. What is brain drain? Explain the causes and consequences of brain drain in the Nepalese context.

Case Study

18. Read the following given situation and answer the questions that follow.

The first row of the table shows that the cross elasticity of demand for margarine with respect to the rice of butter in 1.53 per cent. This means that 1 per cent increases in the price of butter lead to 1.53 per cent increase in the demand for margarine. Thus, margarine and butter are substitutes in the United States. On the other hand, the last row of the table shows that the cross elasticity of demand for cereals with respect to fresh fish is -0.87. This means that a 1 per cent increase in the price of cereals leads to a reduction in the demand for fresh fish by 0.87 per cent. Thus, cereals (for example, bread) and fresh fish are complements. The table also shows the cross elasticity of demand for a few other selected commodities in the United States.

 Commodity Cross-price elasticity with respect to the price of Cross price elasticity Margarine Butter 1.53 Natural gas Electricity 0.80 Pork Beef 0.29 Chicken Pork 0.29 Clothing Food -0.18 Entertainment Food -0.72 Cereals Fresh fish -0.87

By this information, answer these questions.

a) What is cross elasticity of demand?

b) Given the above table, explain the positive and negative cross elasticity of demand.

c) Find out the relationship between positive and negative cross elasticity of demand.

d) Explain the analysis of the above table.

This is the question set along with answers of Introductory Microeconomics  Fall 2016, which was taken by the Pokhara University.

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