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Question 2 MCQ · 1.0 marks
What is the primary definition of **'needs'** in economics?
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Goods that enhance quality of life
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Essential requirements for survival and well-being such as food, clothing, and
shelter
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Products people wish to buy but cannot afford
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Items available in unlimited supply
Published solution
**1. Identify a basic requirement:** In this introductory distinction, needs are requirements for survival and basic well-being, such as food, clothing and shelter. A preferred brand or luxury upgrade is a want rather than the underlying need.
**Answer: B — Essential requirements for survival and well-being such as food, clothing, and .**
A: **Incorrect:** Enhancing quality of life can describe wants beyond basic requirements.
B: **Correct:** It identifies essential requirements for survival and well-being.
C: **Incorrect:** Wishing for an unaffordable product describes a desire, not necessarily a need.
D: **Incorrect:** Availability in unlimited supply does not define whether something is a need.
Which of the following best describes the term **'insatiable wants'**?
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Wants that can be fully satisfied over time
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Wants that are limited in nature
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Unlimited human wants that are never fully satisfied
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Wants that are only driven by affordability
Published solution
**1. Interpret “insatiable”:** A particular want can be satisfied temporarily, but human wants collectively keep expanding as new products, experiences and aspirations arise. Economics therefore treats wants as unlimited relative to scarce resources.
**Answer: C — Unlimited human wants that are never fully satisfied.**
A: **Incorrect:** Satisfying one want does not mean all present and future wants become fully satisfied.
B: **Incorrect:** Limited wants are the opposite of the intended meaning.
C: **Correct:** It captures the continuing and unlimited nature of wants collectively.
D: **Incorrect:** Affordability constrains purchasing, but does not alone determine what people want.
The science of constrained choices and allocation of scarce resources to meet
unlimited human wants
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A guaranteed path to business success
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The study of government taxation
Published solution
**1. Identify the economic problem:** Time, income, labour and other resources are limited, while people have competing wants.
**2. Connect scarcity to choice:** Choosing one use can require giving up another, creating opportunity cost. Economics studies how individuals and societies make these allocation decisions.
**Answer: B — The science of constrained choices and allocation of scarce resources to meet .**
A: **Incorrect:** Money and banking are topics within economics, not its entire scope.
B: **Correct:** Scarcity and constrained allocation are central to the subject.
C: **Incorrect:** Economic analysis informs choices but cannot guarantee business success.
D: **Incorrect:** Taxation is one area of economics rather than its complete definition.
Which of the following is an example of a **'free good'** in economics?
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A loaf of bread
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A bottle of mineral water
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Air
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A government-subsidized medicine
Published solution
**1. Apply the economic meaning of “free”:** A free good is sufficiently abundant in the relevant setting that using another unit does not sacrifice an alternative scarce use.
**2. Select the ordinary example:** Ambient air for normal breathing is the intended example. A zero price to a consumer does not make a resource economically free if producing it uses scarce inputs.
**Answer: C — Air.**
**Convention note:** Clean air can be scarce, and compressed or medical air is an economic good. The answer assumes ordinary ambient air in an unconstrained setting.
A: **Incorrect:** Bread requires scarce ingredients, labour and production capacity.
B: **Incorrect:** Bottled water requires processing, packaging and transport.
C: **Correct:** Ordinary ambient air is the conventional free-good example.
D: **Incorrect:** Subsidized medicine still uses scarce resources even when the recipient pays little or nothing.
Smaller parts of the economy such as individual consumers and businesses
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International trade policies
Published solution
**1. Identify the unit of analysis:** Microeconomics studies decisions and interactions of individual households, firms and particular markets. Macroeconomics studies economy-wide outcomes such as output, inflation and unemployment.
**Answer: C — Smaller parts of the economy such as individual consumers and businesses.**
A: **Incorrect:** Economy-wide GDP and inflation are macroeconomic aggregates.
B: **Incorrect:** A national budget’s overall economic effects are primarily macroeconomic.
C: **Correct:** Individual consumers and firms are the characteristic microeconomic units.
D: **Incorrect:** Trade policy can be studied at either level, so it is less precise than C as a definition.
Which of the following goods would most likely have inelastic demand?
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Luxury handbags
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Restaurant meals
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Mobile phones
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Branded clothing
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None of these
Published solution
**1. Recall the criterion:** Demand is price inelastic when \(|E_d|<1\): quantity responds proportionately less than price.
**2. Compare the listed categories:** Luxury handbags, restaurant meals and branded clothing are generally postponable or have close alternatives. Mobile-phone demand depends on the market definition, period and replacement needs; the wording does not establish low elasticity.
**3. Interpret the intended choice:** None of the four is an unambiguous textbook example such as an essential medicine with few substitutes.
**Answer: E — None of these.**
**Convention note:** Elasticity is empirical and depends on market definition and time horizon. E should not be read as proof that every listed good always has elastic demand.
A: **Incorrect:** Luxury handbags are discretionary and have alternative purchases or brands.
B: **Incorrect:** Restaurant meals can often be replaced by home-prepared food.
C: **Incorrect:** Mobile phones may be important, but elasticity varies; necessity alone does not establish an inelastic coefficient.
D: **Incorrect:** Consumers can substitute other brands or unbranded clothing.
E: **Correct:** It is the intended answer because no listed category is clearly established as price inelastic.
Amazon prime raises subscription prices and many subscribers cancel. This is an example of:
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Inelastic demand, because many people cancelled
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Elastic demand, because the quantity demanded responded substantially to
the price change
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Unit elastic demand, because the change in demand was proportional
6406537023045.
Perfectly inelastic demand, because Amazon Prime is a necessity
Published solution
**1. Identify the response:** The subscription becomes more expensive and many users cancel, indicating substantial price sensitivity.
**2. Classify the intended pattern:** Elastic demand means \(|\%\Delta Q_d|>|\%\Delta P|\). The question intends the cancellations to represent this relatively large quantity response.
**Answer: B — Elastic demand, because the quantity demanded responded substantially to .**
**Convention note:** The exact price and quantity percentage changes are not given, so the elasticity coefficient cannot be calculated. “Many cancellations” alone is not a mathematical proof that its magnitude exceeds 1.
A: **Incorrect:** Inelastic demand means a relatively small proportional quantity response, contrary to the intended scenario.
B: **Correct:** It matches the intended substantial price-sensitive fall in subscriptions.
C: **Incorrect:** No equal percentage changes are supplied to establish unit elasticity.
D: **Incorrect:** Perfectly inelastic demand would show no change in subscription quantity.
In which of the below mentioned context is purchase volume is a better yardstick to differentiate
than purchase value
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In B2C and sometimes B2B
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In B2B but not B2C
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Both B2C and B2B
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None of these
Published solution
**1. Distinguish the measures:** Purchase volume counts units; purchase value measures expenditure, equal to unit price times units.
**2. Check whether buyer type settles the choice:** Either B2B or B2C can contain expensive low-volume purchases and inexpensive high-volume purchases. The better yardstick depends on the product and analytical purpose, not merely whether the buyer is a firm or consumer.
**3. Reject the universal groupings:** None of A–C supplies the missing product or objective that would establish volume as the better measure.
**Answer: D — None of these.**
**Convention note:** The wording leaves “differentiate” unspecified. E means that no general B2B/B2C rule establishes the stated superiority; it does not mean purchase volume is never useful.
A: **Incorrect:** Consumer markets do not inherently make volume a better yardstick than value.
B: **Incorrect:** Business markets do not universally favor volume, and consumer markets do not universally exclude it.
C: **Incorrect:** Both settings can use volume, but that does not establish it as better in both.
D: **Correct:** No listed buyer-type grouping alone establishes superiority of volume over value.
The committee for IIT M BS Cultural Fest Paradox 2027 was formed. They decided to order newer
hoodies, since there were a lot of student complaints on the product quality of hoodies that was
sold earlier. A demand of 2000 hoodies was forecasted based on prior estimates. Each hoodie was
to roughly cost 2000 rupees. Brand ASA was chosen as the new supplier. However, they were
unable to make the customizations. Each customization (Name, Hoodie Number and IIT M logo)
cost 200 rupees/ hoodie. AJB was selected as vendor to customize them. Given the expenses
involved a committee was involved that monitored the purchases made. The buying situations
here are
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New task and straight rebuy
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New task and modified rebuy
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Modified rebuy and straight rebuy
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Modified rebuy and new task
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New task and new task
A published solution is not available for this question yet.
If the price of petrol increases by 10% and quantity demanded falls by only 3%, the PED ratio is
approximately:
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3.33 — elastic
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0.3 — inelastic
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1.0 — unit elastic
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10.0 — perfectly elastic
Published solution
**1. Apply the elasticity formula:** \[E_d=\frac{\%\Delta Q_d}{\%\Delta P}=\frac{-3\%}{10\%}=-0.3.\]
**2. Classify its magnitude:** \(|E_d|=0.3<1\), so demand is inelastic. Quantity changes proportionately less than price; the options report the absolute magnitude.
**Answer: B — 0.3 — inelastic.**
A: **Incorrect:** 3.33 reverses the numerator and denominator.
B: **Correct:** The magnitude is 0.3 and therefore below 1.
C: **Incorrect:** The percentage changes are unequal, so elasticity is not 1.
D: **Incorrect:** 10 is not the calculated ratio; perfectly elastic demand would have an unbounded elasticity magnitude.
Suppose conflict escalates between the **US** **and** **Iran**. This conflict leads to a naval blockade in the
Strait of Hormuz, a critical transit route through which 20% of the world's crude oil passes. At the
same time, widespread panic drives regular consumers and commercial airlines to stockpile fuel
out of fear that supplies will dry up by the following week. This sudden surge in panic buying,
happening along with the supply disruption, creates a severe oil shortage.
How do these two events happening at the exact same time affect the global equilibrium price (P*)
and equilibrium quantity (Q*) of crude oil?
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Price will decrease; Quantity will increase.
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Price will increase; Quantity change is uncertain
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Price change is uncertain; Quantity will decrease.
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Price will increase; Quantity will decrease.
Published solution
**1. Shift supply:** The blockade reduces available oil at each price, shifting supply left. By itself this raises equilibrium price and lowers equilibrium quantity.
**2. Shift demand:** Panic stockpiling increases desired purchases at each price, shifting demand right. By itself this raises both equilibrium price and quantity.
**3. Combine the shifts:** Both forces raise price, so the price direction is clear. Their quantity effects oppose each other; the net change depends on the shifts’ relative sizes and curve shapes.
**Answer: B — Price will increase; Quantity change is uncertain.**
A: **Incorrect:** Both changes exert upward, rather than downward, pressure on price.
B: **Correct:** Price rises while the opposing quantity effects leave its net change uncertain.
C: **Incorrect:** The price direction is clear; quantity is the uncertain variable.
D: **Incorrect:** Quantity falls only if the supply contraction dominates the demand expansion.
Assume, Apple launches its latest flagship iPhone-17. Simultaneously, two market forces occur:
First, a **global semiconductor microchip shortage** severely limits manufacturing output due to
trade deal tariff issues. Second, **Google launches an aggressive marketing campaign** during
**2026 ICC Men's T20 World Cup**, that successfully convinces millions of premium smartphone
users to switch to Android devices.
Assuming the drop in iPhone consumer demand is identical in magnitude to the drop in
production supply, what will happen to the equilibrium price (P*) and quantity (Q*) of the new
iPhone?
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Price will remain unchanged; Quantity will decrease.
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Price will increase; Quantity will remain unchanged.
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Price will decrease; Quantity will decrease.
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Price will remain unchanged; Quantity will increase.
Published solution
**1. Identify both shifts:** The chip shortage shifts iPhone supply left, while switching to Android shifts iPhone demand left. Both changes reduce equilibrium quantity, but they push price in opposite directions.
**2. Use the equal-shift assumption:** Interpret “identical in magnitude” as equal horizontal reductions \(k\) at each price: \(Q_d^{new}(P)=Q_d(P)-k\) and \(Q_s^{new}(P)=Q_s(P)-k\). At the old price, the two new quantities remain equal.
**3. Read the new equilibrium:** The original price still clears the market, while the equilibrium quantity is \(Q^*-k\), below its original level.
**Answer: A — Price will remain unchanged; Quantity will decrease..**
**Convention note:** Equal horizontal quantity shifts at each price are the intended meaning of equal magnitude. Without a precise shift convention, simultaneous decreases generally imply lower quantity but an uncertain price.
A: **Correct:** Equal horizontal contractions leave the market-clearing price unchanged and reduce quantity.
B: **Incorrect:** Both contractions lower quantity rather than leave it unchanged.
C: **Incorrect:** Price can fall if demand contracts more, but the stipulated equal horizontal shifts cancel the price effects.
D: **Incorrect:** Both shifts contract equilibrium quantity, so it does not rise.
**Use the above diagram as your geometric guide for the Question below**
The student-run night canteen at IIT Madras faces a sudden supply shock due to a harvest failure
in villages near Chennai, causing onion prices to rise. Baseline Equilibrium E is indicated by a
green dot in the figure. Based on the graph, what is the initial equilibrium price (P*) per kilogram
and the total baseline revenue generated by the onion suppliers?
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P* = ₹100; Total Revenue = 0
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P* = ₹80; Total Revenue = ₹1,600
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P* = ₹50; Total Revenue = ₹2,500
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P* =₹50; Total Revenue = ₹5,000
Published solution
**1. Read the green equilibrium point:** The graph marks a price of ₹50 per kilogram and a quantity coordinate of 50. The demand and supply curves intersect at that point.
**2. Calculate the plotted-coordinate rectangle:** \(50\times50=2500\). This is the number used by option C.
**3. Apply the actual axis units:** The horizontal axis says “in thousands of kg.” Therefore \(Q^*=50{,}000\) kg and \[R=P^*Q^*=50\times50{,}000=\text{Rs. }2{,}500{,}000.\] That is ₹25 lakh, or ₹2,500 thousand.
**Answer: C — Intended option C; P*=₹50/kg, actual total revenue=₹25 lakh.**
**Convention note:** No option gives the correctly scaled revenue in rupees. C is the intended choice only if 2,500 is read as thousands of rupees; the literal “₹2,500” in the source option is a unit error.
A: **Incorrect:** ₹100 is the demand intercept, not the green equilibrium price.
B: **Incorrect:** ₹80 corresponds to the horizontal price-floor line, not the baseline equilibrium.
C: **Correct:** It gives the correct equilibrium price and the intended numeric rectangle 2500, but its revenue must be in thousands of rupees to respect the axis.
D: **Incorrect:** At the plotted equilibrium the coordinate product is 2500, not 5000, and the quantity scaling still must be applied.
Which of the following correctly distinguish microeconomics from macroeconomics?
i) Microeconomics studies the impact of Trump tariffs on individual Indian businesses;
Macroeconomics studies the impact on India's overall GDP and employment rate.
ii) Microeconomics uses a top-down approach; Macroeconomics uses a bottom-up approach.
iii) Macroeconomics focuses on how an IPL franchise allocates its budget across players.
iv) Both micro and macroeconomics involve constrained choices and optimization under resource
limitations.
v) Micro refers to small or makro and Macro refers to large or mikro.
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i, ii, iii, iv, v
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i, iv, v
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i, ii, v
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i, iii, iv
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None of these
Published solution
**1. Assess statements i and iv:** Studying individual firms versus aggregate GDP and employment is the correct micro/macro distinction. Both levels analyze choices under resource constraints, so i and iv are true.
**2. Assess ii and iii:** The conventional description is micro as bottom-up and macro as top-down, not the reverse. An individual IPL franchise’s budget is a microeconomic allocation problem, so ii and iii are false.
**3. Read v exactly as written:** Although micro means small and macro means large, the statement swaps the accompanying roots: mikro means small and makro means large. Thus v is false as printed.
**4. Match the combination:** Only i and iv are true, and no listed combination contains exactly those two statements.
**Answer: E — None of these — only i and iv are correct.**
**Convention note:** If v were corrected to pair micro with mikro and macro with makro, B would become the intended combination. The answer follows the actual printed wording.
A: **Incorrect:** It includes false statements ii, iii and v.
B: **Incorrect:** It adds the incorrectly paired roots in v to the valid i and iv.
C: **Incorrect:** It includes false statements ii and v and omits valid iv.
D: **Incorrect:** It includes false iii, which assigns a firm-level decision to macroeconomics.
E: **Correct:** The correct combination is i and iv, which is absent.
Agreements and contracts are higher in B2B mainly in comparison to B2C since
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The customer is a business entity
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The purchase volume is high
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The purchase value is higher
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Many people are involved in decision making
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All of these
Published solution
**1. Identify what formal agreements protect:** Contracts specify payment, delivery, quality, remedies and risk allocation. The larger the money at stake, the greater the financial exposure from misunderstanding or non-performance.
**2. Identify the main stated distinction:** B2B transactions often have high monetary value, making detailed contracts especially important. Unit count, organizational participation and buyer identity can accompany this, but do not independently establish the same financial exposure.
**Answer: C — The purchase value is higher.**
A: **Incorrect:** Buyer identity provides context but does not itself measure contractual financial risk.
B: **Incorrect:** A large unit count can still have a small total value; monetary exposure is the more direct explanation.
C: **Correct:** Higher purchase value increases the financial stakes that formal contracts protect.
D: **Incorrect:** Multiple participants affect coordination but do not alone determine transaction value or the need for a contract.
E: **Incorrect:** The alternatives are not all equally sufficient explanations for the “mainly” wording.
A farmer's association argues that **'good news for farming'** (a bumper crop/excellent harvest) can
sometimes be **'bad news for farmers'** financially. Which economic concept best explains this
paradox?
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The Law of Supply — higher supply always increases revenue
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Inelastic demand for agricultural produce — a large increase in supply causes
a proportionately larger fall in price, reducing total revenue
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Economies of scope — producing more variety increases costs
6406537023088.
Elastic demand — consumers buy significantly more when prices fall,
maintaining revenue
Published solution
**1. Shift supply after a bumper crop:** More agricultural output shifts supply right, lowering equilibrium price and increasing quantity sold.
**2. Apply inelastic demand:** Consumers increase purchases only modestly when prices fall. The proportional price decrease can therefore exceed the proportional quantity increase.
**3. Check farmers’ revenue:** \(R=PQ\). For example, a move from ₹10×100=₹1,000 to ₹8×110=₹880 raises sales volume but reduces total revenue. A good harvest can therefore be financially unfavorable.
**Answer: B — Inelastic demand for agricultural produce — a large increase in supply causes .**
A: **Incorrect:** The law of supply does not imply that greater market supply always raises revenue.
B: **Correct:** Inelastic demand allows a large price decline to outweigh the increased quantity sold.
C: **Incorrect:** Economies of scope concern joint production of different products rather than this price-revenue mechanism.
D: **Incorrect:** Elastic demand would make quantity respond more strongly and does not explain the stated inelastic-demand paradox.
**Mini Case Study**
**The Economics of a Campus Mess: How Price Controls Create Shortages In the IIT Madras**
**campus**
In the IIT Madras campus, "R-Goura's" is a private contract student dining mess that serves
approximately 400 to 500 students per semester. At the beginning of each academic term,
students register their preferences among 10 available campus messes. Due to high demand for
certain dining options, a computerized random selection process finalizes students’ allocation. R-
Goura's distinguishes itself by offering a dynamic, rotating menu for a standard 4-course meal
that is high in demand.
**The Economic problems for R-Goura's Mess:**
To provide financial predictability for students, the institute mandates that subscription rates are
strictly fixed for the entire semester. R-Goura's cannot alter its prices in between semester **(Price**
**inelastic)**, regardless of fluctuations in commodity prices, supply chain disruptions, or shifts in
student preferences .
Let us assume that at the start of the semester, the equilibrium price for a semester-long premium
mess subscription under normal market conditions is calculated to be ₹15,000 per student. At this
rate, exactly 450 students want to join, matching the mess’s optimal operational capacity.
However, the student senate and administration cap the maximum allowable semester rate at
₹12,000 per student. Midway through the semester, a sudden surge in gas prices, wholesale
vegetable and fuel prices happened due to US-Iran geopolitical tensions, resulting in a shift in the
operational cost structures across campus.
Answer the subquestions based on your understanding of how supply, demand, and market
equilibrium principles apply to this case study.
Prior to the price cap, what was the natural equilibrium price (P*) and equilibrium quantity (Q*) of
students that R-Goura's would host without administrative intervention?
6406537023089.
P* = ₹15,000; Q* = 450 students
6406537023090.
P* = ₹16,500; Q* = 420 students
6406537023091.
P* = ₹12,000; Q* = 330 students
6406537023092.
P* = ₹14,000; Q* = 470 students
Published solution
**1. Identify the unregulated baseline:** Before the cap, the passage explicitly states that ₹15,000 attracts 450 students, matching the mess’s operational supply.
**2. Separate equilibrium from intervention:** The later ₹12,000 ceiling is an administratively imposed price. It does not replace the original natural equilibrium being asked for.
**Answer: A — P*=₹15,000; Q*=450 students.**
**Convention note:** The passage calls fixed prices “price inelastic.” A fixed administrative price is a price control; it does not establish that demand or supply is inelastic.
A: **Correct:** It reproduces the stated pre-intervention equilibrium.
B: **Incorrect:** These price and quantity figures are not the stated baseline.
C: **Incorrect:** This uses the ceiling price and a constrained supply quantity rather than the natural equilibrium.
D: **Incorrect:** Neither figure matches the passage’s baseline.
**Mini Case Study**
**The Economics of a Campus Mess: How Price Controls Create Shortages In the IIT Madras**
**campus**
In the IIT Madras campus, "R-Goura's" is a private contract student dining mess that serves
approximately 400 to 500 students per semester. At the beginning of each academic term,
students register their preferences among 10 available campus messes. Due to high demand for
certain dining options, a computerized random selection process finalizes students’ allocation. R-
Goura's distinguishes itself by offering a dynamic, rotating menu for a standard 4-course meal
that is high in demand.
**The Economic problems for R-Goura's Mess:**
To provide financial predictability for students, the institute mandates that subscription rates are
strictly fixed for the entire semester. R-Goura's cannot alter its prices in between semester **(Price**
**inelastic)**, regardless of fluctuations in commodity prices, supply chain disruptions, or shifts in
student preferences .
Let us assume that at the start of the semester, the equilibrium price for a semester-long premium
mess subscription under normal market conditions is calculated to be ₹15,000 per student. At this
rate, exactly 450 students want to join, matching the mess’s optimal operational capacity.
However, the student senate and administration cap the maximum allowable semester rate at
₹12,000 per student. Midway through the semester, a sudden surge in gas prices, wholesale
vegetable and fuel prices happened due to US-Iran geopolitical tensions, resulting in a shift in the
operational cost structures across campus.
Answer the subquestions based on your understanding of how supply, demand, and market
equilibrium principles apply to this case study.
Suppose the initial market demand function for the R-Goura's mess subscription per semester is
given by Qd = 750−0.02P, and the market supply function is Qs = −150+0.04P, where P is the price
in Rupees. If the administration sets a fixed price ceiling of ₹12,000 per semester, what is the
resulting shortage (excess demand) of student slots?
6406537023093.
0 students (Market clears)
6406537023094.
180 students
6406537023095.
210 students
6406537023096.
150 students
Published solution
**1. Calculate quantity demanded at the ceiling:** \[Q_d=750-0.02(12{,}000)=750-240=510.\]
**2. Calculate quantity supplied at the same price:** \[Q_s=-150+0.04(12{,}000)=-150+480=330.\]
**3. Subtract supply from demand:** \[\text{Shortage}=Q_d-Q_s=510-330=180\text{ student slots}.\] The ceiling is binding because ₹12,000 is below the original ₹15,000 equilibrium.
**Answer: B — 180 students.**
A: **Incorrect:** The market does not clear because 510 students seek only 330 available slots.
B: **Correct:** It equals demand minus supply at the ceiling.
C: **Incorrect:** This is not the difference between 510 and 330.
D: **Incorrect:** This is not the difference between 510 and 330.
**Mini Case Study**
**The Economics of a Campus Mess: How Price Controls Create Shortages In the IIT Madras**
**campus**
In the IIT Madras campus, "R-Goura's" is a private contract student dining mess that serves
approximately 400 to 500 students per semester. At the beginning of each academic term,
students register their preferences among 10 available campus messes. Due to high demand for
certain dining options, a computerized random selection process finalizes students’ allocation. R-
Goura's distinguishes itself by offering a dynamic, rotating menu for a standard 4-course meal
that is high in demand.
**The Economic problems for R-Goura's Mess:**
To provide financial predictability for students, the institute mandates that subscription rates are
strictly fixed for the entire semester. R-Goura's cannot alter its prices in between semester **(Price**
**inelastic)**, regardless of fluctuations in commodity prices, supply chain disruptions, or shifts in
student preferences .
Let us assume that at the start of the semester, the equilibrium price for a semester-long premium
mess subscription under normal market conditions is calculated to be ₹15,000 per student. At this
rate, exactly 450 students want to join, matching the mess’s optimal operational capacity.
However, the student senate and administration cap the maximum allowable semester rate at
₹12,000 per student. Midway through the semester, a sudden surge in gas prices, wholesale
vegetable and fuel prices happened due to US-Iran geopolitical tensions, resulting in a shift in the
operational cost structures across campus.
Answer the subquestions based on your understanding of how supply, demand, and market
equilibrium principles apply to this case study.
If the administration decides to eliminate the random allocation and allows R-Goura's to adjust its
price to clear the market after the commodity price inflation (Qs2 =−270+0.04P), what will be the
new equilibrium price (Pnew\(^{*}\)) to match the demand (Qd =750−0.02P)?
6406537023097.
P* = ₹19,500
6406537023098.
P* = ₹16,000
6406537023099.
P* = ₹15,000
6406537023100.
P* = ₹17,000
Published solution
**1. Equate demand and the new supply:** \[750-0.02P=-270+0.04P.\] Market clearing requires the same quantity on both sides.
**2. Solve for price:** \[750+270=0.04P+0.02P\Rightarrow1020=0.06P\Rightarrow P=17{,}000.\]
**3. Verify both quantities:** At this price, \(Q_d=750-340=410\) and \(Q_{s2}=-270+680=410\). The new price is higher and the quantity is lower than the initial equilibrium.
**Answer: D — P*=₹17,000.**
A: **Incorrect:** At ₹19,500, demand is 360 and supply is 510, giving a surplus.
B: **Incorrect:** At ₹16,000, demand is 430 and supply is 370, leaving a shortage.
C: **Incorrect:** At ₹15,000, demand is 450 and new supply is 330, so the old price no longer clears the market.
D: **Correct:** At ₹17,000 both new supply and demand equal 410.
Saturn solutions decided to replace their existing computing systems with high-speed computing
devices. Their purchase department conducted market research and identified the top 4 vendors-
ABC, DEF, GHI and JKL, each being asked to submit their quotes also known as RFQ. This quote is
based on
6406537023101.
Problem recognition
6406537023102.
General description of needs
6406537023103.
Request for information
6406537023104.
Problem recognition, General description of needs & Request for information
6406537023105.
None of these
Published solution
**1. Locate the procurement stage:** Identifying a need and researching vendors happen before requesting comparable price quotations.
**2. Identify the basis for a quote:** An RFQ normally specifies the required product, performance, quantity, delivery and other commercial conditions. Vendors quote against these detailed requirements or product specifications.
**3. Match the options:** Problem recognition, a general need description and an RFI may inform the process, but none is the precise specification-based quotation stage being sought.
**Answer: E — None of these.**
**Convention note:** The phrase “based on” is broad: prior need recognition and information gathering can contribute to an RFQ. E is the intended stage-specific answer because detailed product specifications are not offered.
A: **Incorrect:** Recognizing the problem starts the process but does not provide detailed quotation requirements.
B: **Incorrect:** A broad need description generally requires more detailed specifications before quotes can be compared.
C: **Incorrect:** An RFI gathers information; it is distinct from an RFQ requesting prices against requirements.
D: **Incorrect:** These earlier activities can inform specifications, but listing them does not identify the actual quote basis.
E: **Correct:** Detailed specifications or the quotation/proposal stage is the intended missing answer.
The finance department of Saturn solutions had a total budget of 50 lakhs. They wanted a total of
50 laptops. All the vendors gave their best prices and there was no scope for further negotiation.
While ABC quoted a price of 70,000 INR/ laptop, DEF, GHI and JKL quoted INR 95,000, 1 lakh and
1.1 lakh/ laptop respectively. Which vendor got eliminated and the role played by finance
department was
6406537023106.
JKL, Decision Making Unit
6406537023107.
JKL, Gatekeepers
6406537023108.
JKL, Influencers
6406537023109.
JKL, Decision makers
Published solution
**1. Calculate the maximum unit budget:** \[\frac{\text{Rs. }5{,}000{,}000}{50}=\text{Rs. }100{,}000\text{ per laptop}.\]
**2. Check each total:** ABC costs ₹35 lakh; DEF costs ₹47.5 lakh; GHI costs ₹50 lakh; JKL costs ₹55 lakh. With no negotiation possible, only JKL exceeds the ₹50 lakh limit.
**3. Identify the intended screening role:** Finance applies the budget threshold to remove an unaffordable vendor before final selection. The question treats that filtering function as gatekeeping.
**Answer: B — JKL; Gatekeepers.**
**Convention note:** In standard buying-center terminology, gatekeepers often control information or access, while finance may also be an influencer or approver. B follows this question’s broader use of “gatekeeping” for budget screening; department names do not determine a fixed role in every purchase.
A: **Incorrect:** JKL is eliminated, but a DMU is the overall buying group rather than the specific filtering role.
B: **Correct:** JKL exceeds the budget, and finance is acting as the affordability filter in the question’s terminology.
C: **Incorrect:** Finance can influence decisions, but the described action is an explicit screening gate.
D: **Incorrect:** Finance is screening affordability; the subsequent question assigns the final vendor choice to the DMU.
The DMU of Saturn solutions now had a tough job to do. They had to select one vendor out of the
three choices they had (ABC or DEF or GHI). They decided to rate the three vendors. A total of 4
CSF/ KSF were chosen. Brand Image, Product Quality, Service Quality, and Market feedback. Equal
weightage was allocated across the 4 KSFs. While GHI scored high on brand image, product
quality and market feedback, they did poorly on service quality. DEF scored high on service quality
but had moderate scores on the rest. ABC had moderate scores throughout. You need to rate
them on a scale of 1-5, where 1 is the least score, 5 being the highest and 3 being moderate.
The final scores of ABC, DEF and GHI are
6406537023110.
4, 3.5 and 3
6406537023111.
3, 4 and 3.5
6406537023112.
3, 3.75 and 4
6406537023113.
3.5, 3 and 4
6406537023114.
None of these
Published solution
**1. Translate the verbal ratings:** Use high=5, moderate=3 and poor=1, as indicated by the 1–5 scale. Each of the four factors has weight 1/4.
**2. Calculate ABC and DEF:** \[S_{ABC}=\frac{3+3+3+3}{4}=3,\qquad S_{DEF}=\frac{3+3+5+3}{4}=3.5.\]
**3. Calculate GHI:** It has three high ratings and one poor rating, so \[S_{GHI}=\frac{5+5+1+5}{4}=4.\]
**4. Match the ordered results:** The scores for ABC, DEF and GHI are 3, 3.5 and 4. None of the numerical options gives that exact sequence.
**Answer: E — None of these — ABC=3, DEF=3.5, GHI=4.**
A: **Incorrect:** ABC should be 3 and GHI should be 4, rather than 4 and 3.
B: **Incorrect:** DEF should be 3.5 and GHI should be 4, rather than 4 and 3.5.
C: **Incorrect:** ABC and GHI match, but DEF’s three moderate ratings and one high rating average to 3.5, not 3.75.
D: **Incorrect:** ABC should be 3 and DEF should be 3.5, rather than 3.5 and 3.
E: **Correct:** The calculated ordered triple is 3, 3.5 and 4, which is absent.
