Description

Business Economics
December 2022 Examination

1. Given below are the details about production in two countries – France and
Indonesia. These countries trade regularly with each other in two commodities
Automobile and Textile. Output per worker per day for Automobiles and Textile are
given below.
Automobile Textile(yards)
France 10 20
Indonesia 5 40
Based only on the information given here, answer the following:
(a) Which country has an absolute advantage in the production of:
i. Automobile
ii. Textile
(b)Which country has a comparative advantage in the production of:
i. Automobile
ii. Textile
(c) Illustrate the gains for each country from trading based on comparative advantage.
(10 Marks)
Introduction
Comparative advantage is a situation in which one country can produce one commodity at a
reduced opportunity price compared to one more country. The absolute advantage is a
situation where an organization can generate a product at a more affordable rate than one
more country. This suggests that the country requires fewer sources and fewer amounts to
produce the very same product that will be produced by a different firm in a much more
costly way.
When determining what product to export, the countries must deal with outright advantage
It is only half solved
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2. A representative economy is described by the following equations:Consumption function: C = 40 + 0.8 (Yd); Yd = disposable income
Tax function: T = 0.2 Y
Investment function: I = 180 – 10r
Government spending function: G = 200
Net exports function: X = 40 – 0.1Y
a. Find the equation for goods market equilibrium for the economy described above.
b. Given that the real interest rate in the economy is 5%, calculate the equilibrium
output in the goods market.
c. How would the goods market equilibrium in the economy change if the income tax
rate is increased to 0.3 and the marginal propensity to import decreases to 0.024? (10
Marks)
Introduction
In economics, the market equilibrium occurs when the aggregate demand in the economy
amounts to the accumulated supply of the goods and services in the economy. The
accumulated supply of the goods and services in the economy is figured out with help of the
communication of the product feature with the labor market. That function is called AS = Y,
and Y is thought to be the point at which complete work takes place. It can be said that in the
items market, the excellent market equilibrium can be thought about with the aid of the list

3. Case Analysis:

a. UEx is a banking institution working in the area of microfinance in the Middle
Eastern region. They are planning to start operations in India. Before entering Indian
market, they would like to study the market structure of the microfinance industry in
India to make an assessment about their scope in the Indian microfinance space. If you
were to advise them on understanding the market structure, how would you go about
with the analysis? Give rationale for the choice of your technique. (5 Marks)
Introduction
If a company is going into a market, market structure is crucial. Getting into a market
requires the participant to conduct an in-depth analysis of the functions of the market in
which the company wishes to operate. These features can easily be analyzed if the
organization finds out about the market structure of the potential market. Speaking the term

b. Assuming Indian microfinance institution is an oligopoly market with a few dominant
players, how would you advise UEx in terms of their product placement and pricing
strategy? Give a brief summary of your advice to UEx. (5 Marks)
Introduction
Oligopolistic market conditions are market conditions of such a market structure in which
two or more big companies take on each other over the no-price competition. They are using
comparable items in the market and are huge companies creating new participants to deal