Business Economics Questionnaire and Answers

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BUSINESS ECONOMICS Assignment - 2 Q 1) Consider the following demand function: 5P=-Q+46 and the following supply (a) What is the equilibrium price and quantity? (a) At equilibrium level: Qd = Qs The equilibrium price is Rs 6 and the equilibrium quantity is 16. (b) Suppose that the demand function shifts to right such that the new demand equation now becomes: 5P=-Q+55. What is the new equilibrium price and (b) At equilibrium level: Qd = Qs The equilibrium price is Rs 7 and the equilibrium quantity is 20. Total Average Fixed Variable Cost Cost (AVC) (TFC) Average Total Cost (ATC) 0 0 420 420 - - - 10 100 520 420 10 52 100 20 180 600 420 9 30 80 30 240 660 420 8 22 60 40 280 700 420 7 17.5 40 50 350 770 420 7 15.4 70 60 450 870 420 7.5 14.5 100 70 630 1050 420 9 15 180 Q 2) (a) Compare monopolistic competition with Oligopoly Difference between Monopolistic Competition and Oligopoly: Monopolistic Competition Oligopoly In Monopolistic Competition there are many sellers and many buyers in the In Monopolistic Competition there are Differentiated Products. These are the products that different or are perceived to different. Products can be differentiated on the basis of quality, style, convenience, location, brand In Oligopoly market there are a small number of sellers in the market but many buyers in the market. In Oligopoly market there are Similar Products. These products are identical and do not have many differential elements. In Monopolistic Competition there are no barriers to enter into the market or exit the market. There are no legal policies or procedures that the company needs to follow before entering into the market or before In Oligopol... ... middle of paper ... ...t either a supplier or a customer. The company markets new products or services that have no technological or commercial synergies with current products, but which may appeal to new groups of The Conglomerate Diversification has very little relationship with the firm's current business. Therefore, the main reasons of adopting such a strategy are first to improve the profitability and the flexibility of the company, and second to get a better reception in capital markets as the company gets bigger. Even if this strategy is very risky, it could also, if successful, provide increased growth and profitability. For example, TATA is an example of vertical diversification it has grown into a conglomerate. TATA has a business of hotels and then it has acquired Jaguar the company that manufactures cars. This is perfect example of a vertical diversification.

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