Description

Micro Economics & Macro Economics

Sep 2026 Examination

 

 

Q1 A telecom company sells mobile phones in different countries and wants to improve its sales forecasting system. The company has observed that factors such as price changes, promotional offers, competitor products, and customer preferences affect the demand for different mobile phone models. Using the concept of the law of demand, discuss how changes in price, promotions, substitute products, and customer expectations can influence customer purchasing decisions and mobile phone demand. (10 Marks)

Ans 1.

Introduction

The law of demand states that, other factors remaining constant, the quantity demanded of a good falls when its price rises and rises when its price falls. For a telecom company selling mobile phones across different countries, demand is not shaped by price alone. Promotions, competitor products, and customer expectations interact with price to determine actual purchasing behavior, and understanding these interactions is essential for building a reliable sales forecasting system across diverse markets with very different income levels and

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Q2 A food retail chain relying on regional farmers experienced a sudden drop in the availability of fruits, vegetables, and dairy products after heavy rains damaged roads and disrupted transport links. Prices in city outlets increased, but suppliers still could not raise deliveries proportionately. Senior executives initially assumed the higher prices would naturally induce more supply, consistent with the law of supply. However, procurement managers argued that the problem stemmed from infrastructure failure, perishability of goods, and seasonal constraints rather than price incentives. The board now needs to decide whether to invest in cold-chain logistics, supplier diversification, and communication networks, or simply allow market prices to adjust until the situation normalizes. Assess whether the decline in fresh produce supply during the disruption should be interpreted as a movement along the supply curve or a shift in supply. Which operational and strategic interventions should the firm prioritize to restore market stability and protect profitability? (10 Marks)

Ans 2.

Introduction

The food retail chain’s sudden drop in fresh produce availability after heavy rains raises a fundamental question in supply analysis, whether this represents a movement along the existing supply curve or a shift of the entire supply curve. Correctly identifying which of these has occurred is essential, since the two situations call for very different operational and strategic responses from the board, and misdiagnosing the cause could lead management

 

Q3(A) Micromax is losing market share in the Indian smartphone industry as customers increasingly prefer brands like Xiaomi and Samsung due to better features, pricing, and brand image. Consumers are price-sensitive but also expect quality products, good after-sales service, and innovation. Using the concept of monopolistic competition, suggest strategies that Micromax can adopt to improve its competitiveness. Discuss product differentiation, pricing, promotion, and customer service in your answer. (5 Marks)

Ans 3A.

Introduction

Micromax operates in a monopolistic competition market where many brands sell differentiated smartphones. Losing share to Xiaomi and Samsung suggests Micromax needs stronger differentiation and a sharper competitive strategy built around the tools available in this market structure.

Concept and Application

Understanding Monopolistic Competition

Monopolistic competition features many sellers offering similar but not identical products,

 

Q3(B) An investment advisory firm is evaluating the Indian telecom sector after a disruptive player rapidly gained subscribers through free voice services, unlimited data, and extremely low tariffs. Over time, weaker rivals faced falling revenues, rising debt, and regulatory payment pressures, while consolidation reduced the number of major players. The advisory team is concerned that what began as aggressive competition may be shifting into a more concentrated market structure. Clients want clarity on whether the sector should still be assessed as competitive rivalry among a few firms or as an emerging case of monopoly-like power. The firm must prepare a market-structure interpretation for strategic investors. Design a competitive strategy map that distinguishes whether the telecom market in this case is moving toward oligopoly, monopolistic control, or monopoly-like dominance. Your answer should build a framework using market power, entry barriers, pricing behavior, and competitive interdependence from the context. (5 Marks)

Ans 3B.

Introduction

The Indian telecom sector shows signs of evolving from aggressive price based competition into a more concentrated market structure. Building a clear framework using market power, entry barriers, pricing behavior, and interdependence helps investors judge whether this