Business Economics

Q1. With the help of the concept of production function. Briefly explain the Law of Variable Proportions and Law of Returns to Scale. Elaborate your answer by citing real world examples.

Q2. Countries are making every effort to cut back on their usage of petroleum products, particularly gasoline, in light of the rising cost of crude oil. Results from this will only become apparent over time. To cut down on the usage of private automobiles, the majority of nations are working to increase public transportation systems’ popularity. For the reasonably developed countries, the income elasticity of spending on private vehicles has been calculated to be approximately 2.5. Some nations, like India, are highly irritated that despite fare reductions, there is no movement towards public transportation. The following describes the user profile of the public transportation system:

They belong to the middle and low income categories with income elasticity less than one and the absolute value of price elasticity also less than one With the above given statement, you are required to suggest your point logically as to why the public transport is not becoming popular and why the use of private vehicles is only continuing to increase.

You can build your answer by keeping income elasticity in mind and analysing it.

Q3a. A corporation in the USA that works in the telecommunications industry is called SNDL. Their intention is to join the Indian telecom industry. Prior to entering the Indian market, they would like to examine the market structure. They are doing this in order to determine how much price power they may have in the Indian telecom market. If you were giving them advice on the same thing, how would you go about comprehending the structure of the market? Explain which test or technique you would choose for determining the market concentration.

Q3b. ABC Ltd sought to determine the nature of the relationship between goods A and B, specifically if they are complementary or substitutes. Regarding the price and quantity requested for commodities A and B, the following information was available.

The price of A remained unchanged, but the price of B dropped from Rs 240 to Rs 200, which increased the demand for A from 3500 to 4000 units. Determine the cross-elasticity of demand between goods A and B, and then provide a commentary on the relationship between the two goods based on the results.