Principles of Economics

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National Institute of Business Management

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FIRST SEMESTER EMBA/ MBA

Subject : Principles of Economics

Attend any 4 questions.  Each question carries 25 marks

(Each answer should be of minimum 2 pages / of 300 words)

1.Explain the advantages of Socialist Economy.

2.Explain the methods of measuring of Elasticity of Demand.

Answer : Elasticity of demand is known as price-elasticity of demand. Because elasticity of demand is the degree of change in amount demanded of a commodity in response to a change in price. Price elasticity of demand can be measured through three popular methods. These methods are:

1. Percentage method or Arithmetic method

2. Total Expenditure method

3. Graphic method or point method.

1. Percentage method:-

3.Describe the kinds of Economic Systems.

Answer : Types of Economic Systems

"You can't always get what you want." That's what the Rolling Stones sang, anyway (check it out: great song even if it's a bit before your time). And while Mick Jagger probably didn't have Econ 101 in mind, he managed to sum up perfectly the core concept underlying all economics.

Scarcity is the fundamental challenge confronting all individuals and nations. We all face limitations... so we all have to make choices. We can't always get what we want. How we deal with these limitations—that is, how we prioritize and allocate our limited income, time, and resources—is the basic economic challenge that has confronted

4.What are the defects of Capitalism? Describe.

Answer : The market economy or capitalism has a number of defects.  In analysing these defects it is obvious that some form of government rules and regulations are necessary in order to protect the environment and future generations.

1.  Increasing inequality in wealth: As an economic system characterized by the private ownership of the means of production and distribution, there exists the obvious tendency for the increasing inequality in wealth.  Because the entrepreneur has the advantage to manipulate the factors of production, especially labour and capital, as he considers best in order to achieve the highest measure of profit.  By the end of the day, the capitalist

5.Explain the factors governing price elasticity of demand.

Answer : There are several factors governing the elasticity of demand for a commodity. They are explained below.

1. Availability of substitutes:

A commodity will have elastic demand if there are good substitutes for it. A small rise in the price of a commodity will send buyers to the substitutes. A lower price of a commodity will invite the former buyers of the substitute goods. A rise in the price of Brooke Bond tea may encourage buyers to use Lipton tea and vice versa. If no substitutes are available, demand for goods will be inelastic. Demand for salt is perfectly inelastic because it has no substitute.

2. Nature of the commodity:

Demand for necessaries is inelastic, because they

6.Explain the characteristics of factors of production.

Answer :

25 x 4=100 marks