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Friday, August 26, 2011

“Write a note on Stocks and Ratios theory.” It is the solved assignment of MB0042 (Managerial Economics) for SMU MBA. There are some other solved assignments for MB0042 - Law of Variable Proportion, Elasticity of Demand and Equilibrium and Disequilibrium.

Stock is always measured at a given point of time and flow is measured over a given period of time. Macro Stock Variables are inventory, capital stock, wealth, debits etc. Macro flow variables are National Income and output, consumption, investment etc.

Both stock and flow are expressed in money units. Stock may be expressed as just rupee but flows are expressed as rupees per month, rupees per year or in any time unit. The distinction between the stock and flow can be cleared with an example. Total money supply is stock but change in money supply is flow.

There are various macroeconomic ratios, which are commonly used in management decision making. Consumption-income ratio shows the relationship between income and consumption. Saving-income ratio is obtained by subtracting consumption from income. Capital-output ratio shows the number of units of capital required for each unit of output produced.

Capital-labour ratio indicates factors proportion, the combination of labour and capital in the production process. Output-labour ratio shows the labour productivity. Index number is a statistical device which shows changes of a variable over a period of time. The value of money can be measured by means of Price Index number, in this there are two price indices consumer’s price index number and wholesale price index.

Index numbers are used in measuring the change in the value of money, changes in wages, and it is also useful for planners to design the policies. Stocks deals ratios and ratios is compatible with stocks. Both are quite compatible with each other to show the basic understanding about managerial economics.

“Define Equilibrium and Disequilibrium.” It is the solved question of MB0042 (Managerial Economics) for SMU MBA assignment. You can take a look of some other solved assignments for MB0042 - Law of Variable Proportion, Elasticity of Demand and Pricing Policies and Objective of Pricing Policy.

Equilibrium is defined in economics as the position of rest or a state of balance or a state where there is no change required in a period of time. Equilibrium is absence of disequilibrium. Economics deals with variables, whose value changes over a period of time.

This concept of equilibrium is used in managerial economics also. Therefore, you, as management students, must understand this concept. Let us take an example of demand and supply analysis. This point where demand and supply intersect each other is the point where price settles down. This is the equilibrium price.

Whenever there is a change in demand and supply forces, this equilibrium is disturbed. But this equilibrium is restored again by interplay of demand and supply factors. There are two types of equilibriums, partial and general equilibriums. The above example is for partial equilibrium; where, it is assumed that everything in the economy is constant.

General equilibrium means equilibrium in all market and sectors. It assumes that everything depends upon everything. It emphasizes on the interdependence between different markets and sectors of economy.

Market Equilibrium is the point where the demand and supply curve intersect each other and the demand is equal to supply. If this equilibrium is disturbed, the price increases above the equilibrium. The supply will be more than the demand and this surplus and this surplus created between the sellers, drives the price down. Whereas, if the price is above the equilibrium price, there is shortage and the competition among the buyers drives the price up to the equilibrium price. The increase in the demand increases both the equilibrium quantity and equilibrium price.

Sunday, August 7, 2011

It is the solved assignment of - “Define Pricing Policy. Explain the various objective of pricing policy.” It is the question of MB0042 (Managerial Economics) SMU MBA assignment. There are already some solved assignments for MB0042 - Law of Variable Proportion, Elasticity of Demand and Price Discrimination.

Pricing Policies:

The decision of pricing is very important in any business. Price once fixed is never permanent. It needs to be reviewed and revised according to the market conditions.

Objectives of Pricing Policy:

To Maximize Profits:

Every firm tries to maximize their profits. So they should have a price policy, which fetches them maximum revenue. Every firm should have a price policy keeping the long run prospects in mind.

Price Stability:

Always fluctuating price is not for the goodwill of the company. A stable price always wins the confidence of customers.

Capture the Market:

Producer’s aim is to capture the market and to do so, he fixes comparatively lower price for his product, while introducing a product to capture the lion share of market. But once they gain stability and consistency they can change their price policy.

Facing Competitive Situation:

Every producer should fix the price, keeping the price of the competitor in mind in some types of market structure; prices are fixed in such a way so as to restrict the entry of rival firms in the industry.

Ability to Pay:

The price should be fixed according to the ability of consumer to pay; high price for rich customers and low for poor customers. This can be applied in case of services given by doctors, lawyers etc.

Prices once fixed cannot be kept constant forever; it has to be revised according to the condition and the economic situation. The main objective of pricing policy is to maximize profit for the firm, stability is necessary to win the confidence of the customers and it should be able to capture enough market for the firm.

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