Stocks and Ratios for MB0042 for MBA Assignment

“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.

Equilibrium and Disequilibrium Theory for MB0042 for SMU MBA Assignment

“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.

Pricing Policies and Objective of Pricing Policy from MB0042 for SMU MBA Assignment

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.

Law of Variable Proportion from MB0042 SMU MBA Assignment

“Explain the Law of Variable Proportion.” The question has been solved for MB0042 (Managerial Economics) SMU MBA assignment. I have already submitted the solved assignments for MB0042 - Elasticity of Demand, Price Discrimination and Marginal Efficiency of Capital.

Law of Variable Proportion:

Total Product (TP) – Total quality of output produced by a firm.

Average Product (AP) – The total produced by a firm divided by the quantity of variable factors used to produce.

AP = TP/Q

AP – Average Product

TP – Total Product

Q – Number of Variable Factors

Marginal Product (MP) – Change in TP caused as a result of additional unit of Variable factor employed to the combination of Fixed Factor.

Law of variable proportion is also called Law of Diminishing Returns. It examines the production function when one factor varies keeping the quantities of other fixed factors constant. That is how the output varies when Variable Factors are employed to the fixed factors.

The law states, when Variable factors are increased in equal doses keeping the Fixed Factor constant, the total product will increase. But after a certain point it will increase at a diminishing rate and finally the total product starts decreasing.

Assumption:

This law is subject to certain assumptions:

1. The state of technology is given

2. Only one factor of production must be variable. In the example illustrated below, we have taken it as labour

3. There are some inputs, which are kept constant of fixed



In the above table, first column shows fixed factor as the land, say 5 acres. Second column shows labour as variable factor. Third column shows Total Product which changes due to change in the variable factor. Fourth column shows AP which is derived by dividing TP with Q. Fifth column, is MP which is derived by change in TP with change in Q. In the above table, at the fourth unit of variable factor, the total product reaches maximum and then starts has reached its maximum at third unit of variable factor. Marginal product starts falling first, average product follows it and total product falls last.

Marginal Efficiency of Capital and Factors of MEC for MB0042 Managerial Economics MBA Assignment

It is the solved assignment of – “What is Marginal efficiency of Capital? Describe the factors determine MEC.” The question has been submitted for MB0042 (Managerial Economics) SMU MBA assignment. There are already Elasticity of Demand and Price Discrimination from MB0042.

Managerial Efficiency of Capital (MEC) – any investment decision depends not only on rate of interest but also whether or not the expected rate of returns on the investment is greater than cost of borrowing the funds,. In these two factors, the MEC is an important factor because MEC is the expected rate of returns from the investment. If the returns expected are low, then the investment is not profitable because in short run, rate of interest is stable.

In MEC, capital means the real productive assets. MEC depends on expected rate of returns of a capital asset over its life time which is also called Prospective Yield and the supply price of capital assets. Any business man will weigh the prospective yield with the supply price before investing.

Factors Affecting MEC:

Expected demand for future – if the demand is expected to increase, the decrease in future, the prospective yield will be low and so the MEC. So the change in expectation gives sudden ups and downs in investment decisions.

Level of income – when people experience gains through reduction in tax or gains in bullish market, the businessmen become more optimistic as they know when income increases, the demand will increase and so the MEC is high and it is the other way when there are huge losses.

When consumption changes – In real life, whenever there is a shift in consumption Function, the MEC also changes.

Business expectation – Investment is something which gives returns only in the future. Any decision on investment depends on the return which the businessmen expect in future. If the environment is optimistic that leads to more expectations in future.

MEC and Business Expectation:

MEC depends on the businessmen’s expectations, which increases due to invention and goes down due to any threat to the returns on investment. It is also affected by the annual spirit of the entrepreneur. That is why investments are not always calculations but also irrational optimism. Business expectations are based on existing events and partly future facts.

Elasticity of Demand and Its Factors for MB0042 MBA Assignment

This is the solved assignment of – “What is Elasticity of Demand? Explain the factors determining it.” It is written for MB0042 (Managerial Economics) SMU MBA assignment. We already have explained about price discrimination and categories of environmental stressors.

Factors Influencing Price Elasticity of Demand:

Nature of Commodity - By the nature of commodity, we divide them into comfort, luxury and necessity. For luxuries and comforts the Ep> 1 because when prices of these commodities decrease, the demand for these commodities will also increase; whereas in case of necessities, the Ep<1 because when the price of these commodities decrease, the demand for these commodities will increase by less than proportionate.

Availability of substitutes – For those commodities which have enough substitutes in the market, the price elasticity is of more than one, because when the price of a commodity has many substitutes, the consumer will shift to the substitute available in the market.

Number of Uses – Those commodities which have many or multiple uses like coal, milk. For such commodities, the elasticity is more than one as they can be used for more than one purpose. So, if the price of such commodity decreases, there will be increase in the demand. But for those commodities which have very less use of limited uses, the demand will be relatively inelastic.

Durability of commodity – Durable goods is those which last for many years. E.g.: motorcycle, TV, washing machines, etc. The price elasticity of demand for durable goods will be more than one because when the price of such commodities increases, the demand will increase, but for the commodities like fish, vegetables etc., which come under perishable goods, the elasticity of demand will be less than one as these commodities cannot be stored. So even if the price decreases, the demand will not increase.

Consumer’s Income – The price elasticity of demand will be relatively elastic for overall commodities which the consumer’s income is high.

Price Discrimination for MB0042 MBA Assignment of SMU

“What is Price Discrimination? Explain the basis of Price Discrimination.” You need to solve the assignment question for MBA Semester 1 MB0042 – Managerial Economics. It is the assignment of fall session. You can check out other assignment questions also such as - Different Categories of Environmental Stressors and Process of Negotiation.

The measurement of this sensitivity in terms of percentage is called Price Elasticity of Demand. According to Marshall, Price Elasticity of Demand is the degree of responsiveness of demand to the chance in price of that commodity.

Perfect elastic demand is a case of theoretical extremity. When a small change in price leads to a very substantial change in quantity demand, the price elasticity is numerically infinite.

When a demand for the product is independent of price, such demand remains unaffected with any magnitude of change in price.

To make relatively elastic simpler, we can say that any small change in price leads to a big change in quantity demanded. It can be an increase or decrease.

When there is less then proportionate change in demand to the change in price, we say that the demand is relatively inelastic that is Ep<1.

In numerical co-efficient of price elasticity of demand in different cases, we find that its value ranges from zero to infinite.

For those commodities which have enough substitutes in the market, the price elasticity is of more than one, because when the price of a commodity has many substitutes, the consumer will shift to the substitute available in the market.

The price elasticity of demand for durable goods will be more than one because when the price of such commodities increases, the demand will increase, but for the commodities like fish, vegetables etc., which come under perishable goods, the elasticity of demand will be less than one as these commodities cannot be stored.

Different Categories of Environmental Stressors for SMU MBA MB0038 Assignment

It is the solved assignment of “The environmental stressors have a great impact on work performance and adjustment of the individual in an organization. Discuss the different categories of environmental stressors.” You can get the advantage of it for SMU MBA MB0038 assignment like process of negotiation and groupthink.

Environmental and internal conditions that lie beyond an individual’s control are called environmental stressors. Such stressors can have a considerable impact on work performance and adjustment. We can organize environmental stressors into the following categories:

Task Demands: Task demands are factors related to a person’s job. They include the design of the individual’s job, working conditions, and the physical work layout. Changes and lack of control are two of the most stressful demands people face at work.

Role Demands: The social-psychological demands of the work environment may be every bit as stressful as task demands at work. Role demands relate to pressures placed on a person as a function of the particular role he or she plays in the organization.

Role conflict results from inconsistent or incompatible expectations communicated to a person. The conflict may be an inter-role, intra-role or person-role conflict.

Inter-personal Demands: Interpersonal demands are pressures created by other employees. Lack of social support from colleagues and poor interpersonal relationships can cause considerable stress, especially among employees with a high social need. Abrasive personalities, sexual harassment and the leadership style in the organization are interpersonal demands for people at work.

Physical Demands: Non-work demands create stress for people, which carry over into the work environment or vice versa. Workers subject to family demands related to marriage, child rearing and parental care may create role conflicts or overloads that are difficult to manage. In addition to family demands, people have personal demands related to non-work organizational commitments such as religious and public service organizations.