Managerial Economics Assignment 1

Instructions:
1. This assignment needs to be submitted to respective faculty member latest by 28 September, 2017.

Q1. Suppose a firm producing confectionery items wants to forecast the quarter-wise sales its products
for the year 2018, given the following performance in the past:
Quarterly Sale of Confectionery Items (in lakh rupees)
Year Quarter 1 Quarter 2 Quarter 3 Quarter 4
2013 24 28 39 23
2014 25 27 35 27
2015 28 32 42 25
2016 29 33 44 28
2017 34 32 48 30
Using seasonalized time series regression analysis, forecast quarter wise sales of 2018.

Q2. A certain production process employs two inputs - labor (L) and raw materials (K). Output(Q) is a
function of these two inputs and is given by the following relationship:
Q = 6L2K2 0.10L3K3
Assume that raw materials (input K) are fixed at 10 units.
(a) Determine the total product function (TPL) for input L.
(b) Determine the marginal product function for input L.
(c) Determine the average product function for input L.
(d) Find the number of units of input L that maximizes the total product function.
(e) Find the number of units of input L that maximizes the marginal product function.
(f) Find the number of units of input L that maximizes the average product function.
(g) Determine the boundaries for the three stages of production.

Q3. Pillavillai corporation, a maker of small engines, determines that in 2018 the demand function for
its product is P = 2000 50Q, where P is the price of the engine and Q is the number of engines sold per
month.
a) What is the price Pillavillai have to charge to sell 20 engines?
b) If the firm sets the price at Rs.500 how many engines will Pillavillai sell per month?
c) What is the price elasticity of demand if the price is Rs.500?
d) At what price the demand for Pillavillais engines is unitary elasticity?

Q4. Current demand for apples in a city is 1000 boxes per week. In the city, price elasticity of demand
for apples is 1.25 and income elasticity of demand is 2.00. For the next period, if per capita income is
expected to increase by 7% and price of apples is expected to increase by 10%, what will be the
expected demand for apples?

Q5. Vincent Van Gogh sold only one painting during his lifetime, for about $30. A sunflower still life
he painted in 1888 sold for $39.85 million in 1988, more than three times the highest price paid
previously for any work of art. If this painting had been purchased for $30 in 1888 and sold in 1988 for
$39.85 million, what would have been the annual rate of return?