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Reg
APJ ABDUL KALAM TECHNOLOGICAL UNIVERSITY
THIRD/FOURTH SEMESTER B.TECH DEGREE EXAMINATION, APRIL 2018
Course Code: HS200
Course Name: BUSINESS ECONOMICS
Max. Marks: 100 Duration: 3 Hours
PART A
Answer any three questions, each carries 10 marks. Marks
1 Examine the meaning and scope of Business Economics
Suppose an economy's production is at a point inside its PPC. What does it
mean? Draw a diagram and explain.

2 Define total utility and marginal utility. Suppose a boy consume more and more
ice creams Prepare a hypothetical total utility schedule and derive marginal
utilities from it.

What are the central problems of an economy?
What is opportunity cost?
3 How is equilibrium price of a commodity determined? Suppose the number
of buyers of a commodity increases. How does it affect market demand and
equilibrium price? Draw a diagram and explain.

Suppose the finance minister increases the tax on those commodities where
demand is highly elastic. What happens to total tax revenue? Why?

4 What is a production function? Distinguish between fixed proportion and
variable proportion.

Suppose the production function is given as Q 3L1/2K1/2. Find average and
marginal product of labour when L(labour) equals 9 and K(capital) equals 4.

PART B
Answer any three questions, each carries 10 marks.
5 Complete the following short run cost schedule. Cost is given in rupees.
Output(units) TC TFC TVC MC
0 100
1 50
2 40

Derive the relation between MC and AVC in the short run with the help of a diagram.
6 What is perfect competition? Demand curve facing a firm under perfect competition is
perfectly elastic. Why?

Suppose the PV Ratio of a firm is given as 0.25 and its total fixed cost is Rs. 10,000/-.
What is the break-even sales of the firm? If the actual sales is Rs. what is the
margin of safety?

7 What is inflation? What are the fiscal policy measures to control inflation?
What is repo rate? How does RBI use it as a measure to control inflation?
8 National income of a country is given as 2850. If the annual depreciation is 300, net
factor income from abroad -50 and net indirect tax 100, estimate GDPMP. (All figures are

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given in Rs.000, crores).
What are the difficulties in the measurement of national income.
PART C
Answer any four questions, each carries 10 marks.
9 Suppose the initial investment on a project is estimated as 25000 and the cost of capital 6
is 10 per cent. Estimate the NPV of the future cash flows after tax given below and state
weather the project will be accepted or not.
Year 1 2 3 4 5
Cash flows 9000 8000 7000 6000 5000

Give any two merits and limitations of NPV method.
10 Suppose an investor wants to decide whether to build a small facility, medium facility or
large facility in a situation of uncertainty . The payoff table (in 000) of the project is
given below. Which alternative will be selected according to Maximin, Maximax and
Laplace principles. State clearly the reason for each selection.
Possible future demand
Alternatives Low Medium High
Small facility 8 8 8
Medium facility 6 10 11
Large facility 1 3 14

What do you mean by a risky situation in business? How is decision taken under
risk?

11 What is cost benefit analysis? Give any two limitations of cost-benefit analysis.
12 Distinguish between foreign direct investment and foreign portfolio investment.
Give any three disadvantages of foreign investment.
What do you mean by current liabilities in a balance sheet?
13 The data given below shows the sales of cars in a showroom from 2012 to 2016.
Develop a trend equation and predict the sales for the years 2017 and 2018.
Year 2012 2013 2014 2015 2016
Sale 85 92 89 105 108

14 What is a money market? Give any four functions of money market.
What is GST?