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Business Economics-1-2015

Business Economics-1-2015

Question 1: Calculate Elasticity in the following cases:

a) Assume that a business firm sells a product at the price of Rs 500. The firm has decided to reduce the price of the product to Rs 400. Consequently, the demand for the product is raised from 20,000 units to 25,000 units. Calculate the price elasticity of demand.

b) Suppose the monthly income of an individual increases from Rs 15,000 to Rs 20,000. Now, his demand for clothes increases from 35 units to 40 units. Calculate the income elasticity of demand.

c) Assume that the quantity demanded for detergent cakes has increased from 400 units to 500 units with an increase in the price of detergent powder from Rs20 to Rs 25. Calculate the cross elasticity of demand between two products.


Question 2: Complete the table:


Out Units Total Cost Average Total Cost Fixed Cost Average Fixed Cost Average Variable Cost Marinal Cost
0 100          
25 150          
50 200          
75 250          
100 300          
125 350          
150 400          
175 450          
200 500          


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