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BUSINESS ECONOMICS
1. State how the ordinal utility
approach to consumer behaviour is different from the cardinal utility approach
by Marshall. In the context of indifference curve (IC) technique using ordinal
utility approach, explain whether following two statements are true. - “IC
slopes downwards because if the quantity of one product is reduced, the
quantity of other product must also be decreased” and “Slope of indifference
curve indicates the rate at which individuals are ready to substitute one
commodity by the other”. Substantiate your view on each of the statements
separately.
2. With the help of the concept of
production function, explain the difference between Law of Variable Proportions
and Law of Returns to Scale. Elaborate your answer by citing real world
examples.
3. a) Discuss product differentiation
as an important feature of Monopolistically Competitive market. Explain the
statement “Price flexibility under monopolistic competition depends on the
degree of product differentiation”, by referring to the case of any FMCG
industry.
3. b) PepsiCo has been a leader in soft
drink industry. But over years, it has diversified in various snack foods. Over
half of its current profits come from non-soft drink products. What, in your
opinion, is the economic principle behind it?
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