Semester:

Maximum Marks: 50 marks Examination: ESE Examination Date:28/01/2024 Duration: 3 hrs

Programme code: Class: MBA WE, Batch -

Semester: 1
Programme: MBA Working Executive Batch 1 1

College: K. J. Somaiya Institute of Management Name of the department/Section/Center: Eco

Course Code: 117P18C105 Name of the Course: Managerial Economics

Instructions: Q. no 6 is compulsory.
Attempt any 3 questions from the remaining questions.

Question No. Max.

Marks

1 a) Is the price elasticity of supply usually larger in the short run or in the long run? Why? 4
4
b) Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston: 2

Price Qty Demanded for business Qty Demanded for vacationers

travelers

$150 2,100 1,000

$200 2,000 800

$250 1,900 600

$300 1,800 400

i) As the price of tickets rises from $200 to $250, what is the price elasticity of demand for a) business travelers and b) vacation -

ers?

ii) Why might vacationers have a different elasticity from business travelers?

2 a. Define returns to scale and explain all three types of returns to scale with appropriate examples. 5
b. Explain the difference between economies of scale and economies of scope in business 5

3 What are the characteristics of a perfectly competitive market? Why the firms are price taker in a perfectly competitive market? 10

4 What makes an oligopolistic market different from others and what is the significance of these characteristic features? 10

5 What are the reasons for the existence of a monopoly? What are the measures taken by the government to control the undesirable outcome 10
of the monopoly?

6 Case: Tomato Shortages and Price Increase 20

Case: Tomato Shortage and Price Increase

The tomato market is experiencing a severe shortage, leading to a significant increase in prices. In this case, we examine the factors contributing to the tomato

shortage, the impact on farmers and consumers, and the potential consequences for the overall vegetable market.

Shortage and Price Surge:

Tomato prices are expected to rise by over ₹100 per kilo due to the shortage in supply. Last week, tomato rates had already surpassed ₹80 per kilo. The scarcity

is evident in the Kolar wholesale APMC market, where a 15-kg crate of tomatoes was sold for ₹1,100. The shortage in supply is likely to affect the retail market

in the near future.

Reasons for Shortage:

Farmers have reported lower tomato cultivation this year compared to the previous year. The decreased sowing of tomatoes can be attributed to farmers in Kolar

shifting to bean cultivation, driven by soaring bean prices last year. Unfortunately, deficient monsoon and dried-up crops have resulted in tomato production

being only 30% of the usual yield.

Impact on Farmers and Trade:

The lack of interest among farmers in tomato cultivation stems from the crash in tomato prices last month, reaching as low as ₹3-5 per kilo. Many farmers were

compelled to discard their produce by driving tractors through the crop. With tomato deficiency in Maharashtra, buyers are now turning to West Bengal, Odisha,

and even considering importing from Bangladesh to meet the demand.

Market Effects and Price Increases:

The tomato shortage has triggered price surges in other vegetables as well. The prices of beans, carrots, and capsicum have increased significantly, with beans

ranging between ₹120-₹140 per kilo, certain carrot varieties inching towards the ₹100 mark, and capsicum prices crossing ₹80 per kilo. Additionally, egg prices

have surged by ₹7-₹8 per kilo.

Implications for Hotels and Consumers:

The Bruhat Bengaluru Hotels' Association (BBHA) has stated that price hikes on menus are inevitable due to the increasing vegetable prices. As tomato prices

continue to rise, hotels may be forced to pass on the cost to consumers, impacting their dining experience and expenditure. The tomato shortage has led to a

substantial increase in prices, affecting farmers, traders, and consumers alike. The shift in cultivation patterns, coupled with unfavorable weather conditions, has

resulted in a significant decrease in tomato production. The repercussions of this shortage extend beyond tomatoes, impacting prices in the overall vegetable

market and potentially affecting the affordability of food for consumers.

Discussion Questions:

1. What factors have led to the shortage of tomatoes and the subsequent surge in prices?
2. How do changes in weather patterns and crop yields affect tomato cultivation and supply?

3. Discuss the impact of the tomato shortage on farmers. Why are they shifting to other crops?

4. Analyze the implications of the tomato shortage on the vegetable market as a whole.

5. How do rising vegetable prices, including tomatoes, impact consumers' purchasing power?

6. What strategies can farmers, traders, and consumers adopt to cope with the tomato shortage?

7. Evaluate the potential consequences for the agricultural sector and the overall economy.

8. How might the price increase of tomatoes affect restaurants and their menu offerings?

9. What measures could be taken to prevent or mitigate future crop shortages and price fluctuations?