Question

 

Question No. 01

 

Demand for Magnum Ice Cream is given by an equation as Q = 70 – 10P + 4 Px + 50 I  

Where, Q = Quantity of Magnum demanded, P = Price of Magnum Ice Cream, Px = Price of Walls Ice Cream, I = Per Capita Income

a.       Assume P = Rs 100, Px = Rs 120 and I = Rs 25 (Rs in thousands).   

Calculate        

(i)                 Price Elasticity of Demand

(ii)              Cross Price Elasticity of Demand

(iii)            Income Elasticity of Demand

b.      How the elasticity does estimates help in managerial decision making?  

Answer 1

Mandatorarily Answering only first four MCQ:

1) option A)

A) looks like a possible Constraint

2)option B)

Economics deals with Allocation of limited resources to unlimited wants

3) option D)

in Constrained optimization, objective function is maximized/ minimised , as per a constraint function

4) option B)

As price rise, TR will fall, if Demand is elastic.

Bcoz % fall in Q will be higher than % rise in P

So TR will fall