BBA 1SEM Business Economics

Business Economics
Q1. Discuss the nature and scope of Business Economics
Q2. How does the study of Business Economics help a business manager in decision-making? Illustrate your answer with the real world examples.
Q3. What is the Opportunity Cost? How can it be calculated? What are the precautions to be kept in view while using the Opportunity Cost?
Q4. Draw individual and market demand schedules. Discuss the difficulties in preparing a market demand schedule.
Q5. Write short notes on:
a) Demand forecasting
b) Consumer Surplus
c) Marginal Utility
d) Gross price elasticity of demand
e) Complementary goods
Q6. Explain the law of Variable proportions. Which is the bet stage of production?
Q7. Explain Least Cost Combination of the factors.
Q8. Distinguish between Average and Marginal Cost and show by examples and diagrams that marginal cost is less than average cost if average cost is falling and marginal cost is more than average cost is rising.
Case Detail :
Read the case study given below and answer the questions given at the end.
Case Study
Two Wheeler Industries in India
The two wheeler category is steadily moving from a discretionary purchase to an essential purchase, especially among the burgeoning Indian middle-class households. Better quality and durability, higher fuel efficiency, new age styling, and features in conjunction with a slew of new product launches and greater finance availability have been the primary drivers of sales in the past years. India secures second-largest position in two wheeler production. Apart from the discussed facts, inadequacy and poor quality of public transport system in India have pushed the demand of two wheelers. In India, the two-wheeler industry is highly diversified in terms of presenting a versatile product line. Two-wheeler manufacturers produce different economic models for general public as well as some specific models to cater the different needs of high-income group. Two-wheelers contain scooters, mopeds, and motorcycles. Few years ago the market was dominated by scooter segment, but scenario changed in 1998-1999 when motorcycles took the edge and never looked back. Nowadays, Indian two-wheeler industry is dominated by the motorcycle segment. Hero Honda, Bajaj, TVS Motors, Kinetic Motors, and LML are some of the main players in the Indian two-wheeler industry.
Demand of two-wheelers is increasing day-by-day. In the year 1990-1991, the demand for the two-wheelers was 1.82 million units that grew to 3.83 million units in the year 2000-2001. The projected demand for the two-wheelers in the year 2014-2015 is estimated to reach 16 million units. This is no doubt a rosy picture for the growth of Indian two-wheeler industry. Table1 and Table2 present market segmentation and product variation of two-wheelers in India, respectively.
Table 1: Market segmentation for the two-wheeler industry in four regions of the country
Market segmentation
Segment Share (%)
North 32
East 9
West 27
South 32
Table 2: Product wise market share for the two-wheeler industry in India
Product Variation
Type Share (%)
Motorcycles 66
Scooters 22
Mopeds 11
Q1. Make a comprehensive analysis on two-wheeler demand in India.

1. To say that a good is scarce means
2. Factors of production, such as labor, capital, natural resources and entrepreneurial ability are traded in
3. Which of the following is the best example of an activity that would be undertaken by an entrepreneur?
4. The total amount of physical capital available in a country is called
5. When economists say that people act rationally, they mean that
6. Which of the following statements relates to microeconomics?
7. Macroeconomics can best be described as the study of
8. An answer to the question “How are goods produced?” determines
9. What is the efficiency criterion that describes a situation where goods and services are produced at the lowest possible cost?
10. The marginal benefit from consuming another unit of a good
11. Demand means
12. the shape of ppc is always
13. Two indifference curves
14. Consumer equilibrium is calculated at
15. The demand curve under Monopoly is
16. When MC falls ,AC
17. MC always cuts AC at its
18. Long Run Costs Curve is an
19. Marginal Utility curve is
20. Consumer equilibrium is calculated at
21. Income Elasticity of demand means
22. Law of Supply means
23. Which of the following is an example of a normative statement?
24. An example of a positive statement is
25. An economic theory is tested by
26. The process of developing models, testing hypotheses and revising models is often referred to as
27. A market is
28. In a mixed economy, economic decisions are made by private individuals and by
29. When Pakistan builds a dam in Chittagong using few machines and a great deal of labor, it is answering the ________ question
30. how to produce”
31. The statement that there is a positive relationship between X and Y means that
32. Which of the following graphs or charts must add up to one hundred percent?
33. An output combination is technically efficient if
34. A country that produces a maximum possible combination of two goods using all of the resources available in the economy
35. Consumer goods and services such as automobiles and haircuts are traded in
36. The net factor income earned within the domestic territory of a country must be equal to –
37. A circular flow diagram
38. Which of the following is not a determinant of demand?
39. The difference between the maximum price a person is willing to pay for a good and the price actually paid for the good is called
40. Amrin goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Cameron’s consumer surplus from the purchase is

1.Average product is defined as
2.To manufacture a PC, you require a keyboard and a monitor. If you measure keyboard on the X-axis and monitor on the Y-axis, the shape of the Isoquant will be—
3.When average product is highest?
4.The intersection of marginal product curve and average product curve characterizes the point of—
5.The average total cost will be minimum at a point where-
6.Which of the following curves is called envelope curve
7.Average fixed cost
8.Which of the following cost curves is also called planning curve?
9.Economic profit is
10.The intersection of the marginal cost curve and the average cost curve characterizes the point of—
11.Which of the following costs remain constant as the output increases?
12.Increasing marginal costs with increase of output implies
13.Which of the following cost curves is not ‘U’ shaped?
14.What would be the shape of the total cost curve when a manufacturing unit is experiencing economies of scale
15.In perfect competition, a firm maximizing its profit will set its output at that level where-
16.It is advisable for a firm operating under perfect competition to shut down in the short run when the price of the product falls below the—
17.Which of the following is not a feature of perfect competition?
18.In the long run, a perfectly competitive firm earns only normal profits because of
19.The doctrine of invisible-hand applies to economies in which all the markets are-
20.The horizontal demand curve for a firm is one of the characteristic features of-
21.A perfectly competitive firm can increase its sales revenue by
22.If a perfectly competitive industry is an increasing cost industry, the demand curve faced by a firm will be-
23.A perfectly competitive firm earns abnormal profits when its
24.Which of the following is not a source of market imperfection?
25.Which of the following is not a barrier to entry?
26.The maximum profit condition for a monopoly firm is—
27.Market inefficiencies can come from—
28.A monopolist who faces a negatively sloped demand curve operates in the region where the elasticity of demand is-
29.An entrepreneur in order to maximize the profits, without affecting the price, should produce an output where-
30.Macroeconomics is concerned with-
31.Real GNP increases
32.Personal income includes all of the following except
33.NDP does not include-
34.National income is
35.The difference between personal disposable income and personal income is—
36.The net factor income earned within the domestic territory of a country must be equal to –
37.The ratio of the change in equilibrium output to the change in autonomous spending that causes change in output is called-
38.When planned saving is greater than planned investment
39.An autonomous increase in investment—
40.What happens to the demand for coffee, when the price of tea increases ?
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