IMT-20: Managerial Economics-2014
IMT-20: Managerial Economics-2014
SECTION - A
Q1: Distinguish between marginal and incremental principle with the help of an example.
Q2: Describe the relationship between price elasticity of demand, total revenue and marginal revenue? How does price elasticity help in taking pricing decisions by a firm?
Q3: Compare the concept of cardinal and ordinal utility.
Q4: With the help of diagrams explain the relationship between Long Run Average Cost and output.
Q5: Why is normal indifference curve convex to origin?
SECTION - B
Q1: Explain the relationship between Average Product and Marginal Product of labour.
Q2: With the help of examples explain the differences and similarities between monopolistic competition and monopoly?
Q3: What is scarcity? Explain why scarcity exists at both the micro as well as macro level?
Q4: Why are cartels formed? Describe the conditions for existence of successful cartels.
Q5: Briefly explain why does output expand at a diminishing rate in the second stage of law of diminishing marginal returns?
SECTION - C
Q1: How is National Income calculated with the help of Expenditure Approach?
Q2: What measures are adopted by the government to counteract recession?
Q3: Differentiate between demand-pull and cost push inflation.
Q4: With diagram explain why is short run average cost curve U-shaped?
Q5: "A perfectly competitive firm cannot practice price discrimination." Explain why.
CASE STUDY - 1
No slowdown in silver demand
Silver is easier to figure if you see it as a market with two intertwining strands. Its demand, supply and prices each have two independent dynamics at work. The dichotomy and influence of these strands on each other makes this market no place for old men.
Consider supply. The world gets silver from silver mines, and what governments and people sell. In 2008, supply crossed 28,500 tones. Silver mines accelerate production when prices are attractive. People and governments too sell their family silver when prices are attractive. When prices plummeted after the financial crisis last year, scrap sales plummeted too. But the world also gets a huge quantity of silver as a by-product of lead, zinc, copper and gold mines. As these mines are focused on the price of their primary metal, they continue to produce silver irrespective of its price signals. Put together, you can never bet silver supply will directly respond to price.
There is a similar dichotomy at work in demand as well. On the one hand, silver is bought as a precious metal to hedge against inflation, currency fluctuations and general economic malaise. So whenever there is fear and panic in the market, people gravitate towards silver. On the other hand, silver is simply another raw material used by factories in making everything from camera films to jewellery, electronics, batteries, hi-tech clothing and radio frequency tags.
Actually half the silver sold is consumed like this. When factories slow down, as they did in the last one year, silver's demand drops too. So demand for silver is a see-saw between its avatar as a precious metal and its day job as an industrial metal. The global recession which wrote off silver's industrial consumption also re-ignited its bullion demand.
How money flows into silver is an equally motley mix. Investors - these could be households, wealthy individuals, exchange traded funds and institutions - believe silver is a store of value and buy it in the form of paper, coins and bars. Ignoring silver's physical demand-supply fundamentals, they trade in silver the way they would gold and closely track the price relationship between the two.
A few far-sighted investors are not bothered about the gold-silver connection. Instead, they are putting their faith in silver's physical demand-supply fundamentals. Though demand for silver to make photography films has sharply dropped in the age of digital cameras, these investors believe supply would not keep pace with total industrial demand in the coming years. While a lot of above-ground silver would continue to re-enter the production cycle each year, investors are hopeful the world will find new commercial uses to suck it out too.
The punters, however, believe silver is simply a shorter route to profit than gold. They speculate on short term price movements on commodity exchanges and use both long and short instruments to gain exposure to silver price. Punters know that in terms of value, the physical gold market is much bigger than silver. Being smaller makes the silver market less liquid and more susceptible to volatility. In short, it is perfect for getting over-the-top money if you have the courage to bet on it. The combined motives and trading strategies of investors and speculators keep the silver market full of frenetic activity.
Where does that leave you? With two choices obviously! You could put your faith in silver as a precious metal and hope its value will rise in line with gold. Or you could see it as just another metal that sometimes even moves in tandem with copper and is currently plagued by lack lustre physical consumption. One thing is certain. Both ways will bring you plenty of edge-of-the-seat excitement.
Questions
Q1: On the basis of the facts given in the case describe the factors that influence demand for silver in India.
Q2: On the basis of the facts given in the case describe the factors that influence supply of silver in India.
Q3: "Prices of silver are influenced by the dynamics of demand and supply." Do you agree? Give reasons.
CASE STUDY - 2
Engel's Law and the Plight of the Farmer
In the nineteenth century, a German statistician, Ernst Engel, etched his name in economic history by proposing what has become known as Engel's Law. Engel studied the consumption patterns of a large number of households and concluded that the percentage of income spent on food decreases as incomes increase. That is, he determined that food is a necessity. His finding has repeatedly been confirmed by later researchers. Examples of estimated income elasticities are shown in the following table. Note that only beef has an estimated elasticity greater than unity.
Estimates of the Income Elasticity for Selected Food Products
Food
Estimated Income Elasticity
Chicken
0.28
Beef
1.05
Tomatoes
0.24
Potatoes
0.15
One of the implications of Engel's Law is that farmers may not prosper as much as those in other occupations during periods of economic prosperity. The reason is that if food expenditures do not keep pace with increases with gross domestic product, farm incomes may not increase as rapidly as incomes in general. However, this tendency has been partially offset by the rapid increase in farm productivity in recent years. In 1940, each U.S. farmer grew enough food to feed about 11 other people. Today, the typical farm worker produces enough to feed 80 people.
Questions
Q1: Define income elasticity of demand. What are the methods of calculating income elasticity. Analyse the income elasticities for food products shown in the table.
Q2: Explain the statement, "if food expenditures do not keep pace with increases with gross domestic product, farm incomes may not increase as rapidly as incomes in general."
Q3: State the usefulness of income elasticity in managerial decision making
IMT-18: Export Finance and Documentation-2014
PART – A
Q1. Explain the role export credit plays in export promotion in India How is the export credit delivery system in India implemented
Q2. Outline various risks covered under standard policy
Q3. Explain FERA TO FEMA Transition .What do you understand by current account and capital account convertibility
Q4. How is a letter of credit transacted? Explain in detail various types of letter of credit
Q5. Does Cargo Insurance play a role in Export Transaction? Explain difference between Marine and cargo insurance
PART – B
Q1. Outline in detail the claims procedure for a export cargo
Q2. As goods exported are in foreign countries, highlight the major standard clauses of export order
Q3. The Indian Exporters are given certain foreign exchange facilities outline the same
Q4. What do you understand by foreign exchange .Explain different types of possible exchange rate regimes?
Q5. Outline the factors affecting exchange rate
PART – C
Q1. Export finance is important to be competitive do you agree with this statement. What are the means of short term financing?
Q2. Outline need of export documentation Explain major shipping documents needed in export transaction
Q3. Explain major steps required in custom clearance of export shipment
Q4. What is the role of clearing and forwarding agents in international trade
Q5. Explain in detail major Inco terms used in export transaction
CASE STUDY – I
FEMA ALLOWS DEALERS TO MAKE REMITTANCES FOR GENUINE DEALS
FEMA, the improved version of FERA, which has come into effect from June, does not do away with exchange controls as such. Nonetheless, it puts an end to the archaic system of sending businessmen and managers to jail for civil offences.
The substitute of financial penalties is better even though the quantum of penalty does not reflect the low national cost of generating foreign exchange. Welcoming the new Act, Fieo Chief, Navratan Samdria, has said that the new Act recognises the export contract. There are no artificial limits in the law for agency commission or buyer claims. The actual incidence of these is left to market forces. Agency commission in the case of rupee trade is, however, not allowed.
The invoice value is no longer sacrosanct; it is a mere reflection of the consignment at the time of drawing upJhe bill. The actual value of goods is a function of time and place, the actual sale proceeds depend upon the market situation. However, the new thinking should be reflected in bank procedures and also the mindsets of the customs and DGFT officials. They are fixed to the invoice values and bank realisation certificates and do not wish to hear anything else.
In the new FEMA rules, business travellers can now avail of. minimum of $5,000 forex with minimum documentation and paperwork. The limit has been raised from the current level of $3,000.
There is new GR/PP form, which should be used in all export documentation. As of now, the RBI has asked exporters to continue with the old forms after modifying them for the FEMA undertakings. The new set of GR/PP forms will be provided to exporters shortly.
On the import side, authorised dealers have been given permission to make remittances for all genuine transactions. In case of doubts on the authenticity' of the transaction, dealers have the right to refuse to deal with the importers, provided they do so in writing.
Exceptions to the general permissions for import remittances are under Schedule II and Schedule II! of the FEMA rules, which cover cases requiring permission from union government as well as situations where monetary ceilings are prescribed.
The important point in exchange control on imports is that RBI approval is required for supplier credit beyond 180 days. For credit below 180 days, no permission is required and the dealer can straight away send out the amount. Similarly, all cases of buyer's credit, which means advance payment for the goods in some form or the other, also require a RBI clearance.
The RBI has withdrawn itself from the task of prescribing documents for each transaction. The decision is left to the authorised dealer who must deal with each situation according to the ground level facts and circumstances. The intention is to control the transaction on the basis of undertakings and declarations rather than conducting another customs clearance at the banking stage.
Agriculture trade: The IIFT and the department of agricultural research and cooperation held a daylong meeting of agriculture experts recently. The well-researched backgrounder from NCAER showed up negative subsidies on most agriculture commodities, rice led the field at over minus 40 per cent. The state government representatives felt that imports were responsible for depressed agriculture prices.
Economists said that rise in state minimum support prices and the consequent difficulties in disposing the expensive purchases is bad for agriculture. Concerns of good security were topmost in the minds of the commerce ministry negotiators. They are looking for ideal tariff rate, which meets the interests of the Indian producers and consumers without compromising food security.
The commerce ministry is on a transparency spree, the main discussion papers on both the agriculture and services negotiations at WTO reflecting the tentative position of the" Indian government on the Internet along with other related material.
Anybody can visit the site in the nic.inserver; one click on the commerce button is all that is required to download the material. Suggestions and views can be sent on the Internet at the Webmaster address. Given the limitations of the negotiations, cogent reactions will strengthen India's case at the WTO forum. The views will also build the consensus on reform in agriculture.
Furnace Oil. The DCFT notified Rs 780 per tonne as the industry rate of drawback on furnace oil supplied to 100 per cent EOUs and export processing zones. The measure reimburses the duties suffered by the deemed export on the fast track route. The brand rate alternative requires verification of the actual duty paid. The DCFT action is especially welcome because the duties suffered are rarely reimbursed by the export promotion system.
Sodium Cyanide. The revenue department has slapped a stiff anti-dumping duty on sodium cyanide imports. The final duty is Rs 68.025 per kg on all imports from US, EU, Czech Republic and Korea. The 16 per cent countervailing duty to compensate for the excise duty suffered by domestic goods must also be paid on the anti-dumping duty. In other words, another Rs 10.88 per kg must be paid as countervailing duty due to the anti-dumping duty of Rs 68.025 per kg. The short paid provisional duties will also be recovered as the customs shoot the demand letter out.
Questions
1. Does FEMA allows better flexibility of all export and import Transactions .
2. What Role does agriculture trade play in International Trade and Negotiations with WTO.
IMT-20: Managerial Economics-2014
SECTION - A
Q1: Distinguish between marginal and incremental principle with the help of an example.
Q2: Describe the relationship between price elasticity of demand, total revenue and marginal revenue? How does price elasticity help in taking pricing decisions by a firm?
Q3: Compare the concept of cardinal and ordinal utility.
Q4: With the help of diagrams explain the relationship between Long Run Average Cost and output.
Q5: Why is normal indifference curve convex to origin?
SECTION - B
Q1: Explain the relationship between Average Product and Marginal Product of labour.
Q2: With the help of examples explain the differences and similarities between monopolistic competition and monopoly?
Q3: What is scarcity? Explain why scarcity exists at both the micro as well as macro level?
Q4: Why are cartels formed? Describe the conditions for existence of successful cartels.
Q5: Briefly explain why does output expand at a diminishing rate in the second stage of law of diminishing marginal returns?
SECTION - C
Q1: How is National Income calculated with the help of Expenditure Approach?
Q2: What measures are adopted by the government to counteract recession?
Q3: Differentiate between demand-pull and cost push inflation.
Q4: With diagram explain why is short run average cost curve U-shaped?
Q5: "A perfectly competitive firm cannot practice price discrimination." Explain why.
CASE STUDY - 1
No slowdown in silver demand
Silver is easier to figure if you see it as a market with two intertwining strands. Its demand, supply and prices each have two independent dynamics at work. The dichotomy and influence of these strands on each other makes this market no place for old men.
Consider supply. The world gets silver from silver mines, and what governments and people sell. In 2008, supply crossed 28,500 tones. Silver mines accelerate production when prices are attractive. People and governments too sell their family silver when prices are attractive. When prices plummeted after the financial crisis last year, scrap sales plummeted too. But the world also gets a huge quantity of silver as a by-product of lead, zinc, copper and gold mines. As these mines are focused on the price of their primary metal, they continue to produce silver irrespective of its price signals. Put together, you can never bet silver supply will directly respond to price.
There is a similar dichotomy at work in demand as well. On the one hand, silver is bought as a precious metal to hedge against inflation, currency fluctuations and general economic malaise. So whenever there is fear and panic in the market, people gravitate towards silver. On the other hand, silver is simply another raw material used by factories in making everything from camera films to jewellery, electronics, batteries, hi-tech clothing and radio frequency tags.
Actually half the silver sold is consumed like this. When factories slow down, as they did in the last one year, silver's demand drops too. So demand for silver is a see-saw between its avatar as a precious metal and its day job as an industrial metal. The global recession which wrote off silver's industrial consumption also re-ignited its bullion demand.
How money flows into silver is an equally motley mix. Investors - these could be households, wealthy individuals, exchange traded funds and institutions - believe silver is a store of value and buy it in the form of paper, coins and bars. Ignoring silver's physical demand-supply fundamentals, they trade in silver the way they would gold and closely track the price relationship between the two.
A few far-sighted investors are not bothered about the gold-silver connection. Instead, they are putting their faith in silver's physical demand-supply fundamentals. Though demand for silver to make photography films has sharply dropped in the age of digital cameras, these investors believe supply would not keep pace with total industrial demand in the coming years. While a lot of above-ground silver would continue to re-enter the production cycle each year, investors are hopeful the world will find new commercial uses to suck it out too.
The punters, however, believe silver is simply a shorter route to profit than gold. They speculate on short term price movements on commodity exchanges and use both long and short instruments to gain exposure to silver price. Punters know that in terms of value, the physical gold market is much bigger than silver. Being smaller makes the silver market less liquid and more susceptible to volatility. In short, it is perfect for getting over-the-top money if you have the courage to bet on it. The combined motives and trading strategies of investors and speculators keep the silver market full of frenetic activity.
Where does that leave you? With two choices obviously! You could put your faith in silver as a precious metal and hope its value will rise in line with gold. Or you could see it as just another metal that sometimes even moves in tandem with copper and is currently plagued by lack lustre physical consumption. One thing is certain. Both ways will bring you plenty of edge-of-the-seat excitement.
Questions
Q1: On the basis of the facts given in the case describe the factors that influence demand for silver in India.
Q2: On the basis of the facts given in the case describe the factors that influence supply of silver in India.
Q3: "Prices of silver are influenced by the dynamics of demand and supply." Do you agree? Give reasons.
CASE STUDY - 2
Engel's Law and the Plight of the Farmer
In the nineteenth century, a German statistician, Ernst Engel, etched his name in economic history by proposing what has become known as Engel's Law. Engel studied the consumption patterns of a large number of households and concluded that the percentage of income spent on food decreases as incomes increase. That is, he determined that food is a necessity. His finding has repeatedly been confirmed by later researchers. Examples of estimated income elasticities are shown in the following table. Note that only beef has an estimated elasticity greater than unity.
Estimates of the Income Elasticity for Selected Food Products
Food
Estimated Income Elasticity
Chicken
0.28
Beef
1.05
Tomatoes
0.24
Potatoes
0.15
One of the implications of Engel's Law is that farmers may not prosper as much as those in other occupations during periods of economic prosperity. The reason is that if food expenditures do not keep pace with increases with gross domestic product, farm incomes may not increase as rapidly as incomes in general. However, this tendency has been partially offset by the rapid increase in farm productivity in recent years. In 1940, each U.S. farmer grew enough food to feed about 11 other people. Today, the typical farm worker produces enough to feed 80 people.
Questions
Q1: Define income elasticity of demand. What are the methods of calculating income elasticity. Analyse the income elasticities for food products shown in the table.
Q2: Explain the statement, "if food expenditures do not keep pace with increases with gross domestic product, farm incomes may not increase as rapidly as incomes in general."
Q3: State the usefulness of income elasticity in managerial decision making
IMT-18: Export Finance and Documentation-2014
PART – A
Q1. Explain the role export credit plays in export promotion in India How is the export credit delivery system in India implemented
Q2. Outline various risks covered under standard policy
Q3. Explain FERA TO FEMA Transition .What do you understand by current account and capital account convertibility
Q4. How is a letter of credit transacted? Explain in detail various types of letter of credit
Q5. Does Cargo Insurance play a role in Export Transaction? Explain difference between Marine and cargo insurance
PART – B
Q1. Outline in detail the claims procedure for a export cargo
Q2. As goods exported are in foreign countries, highlight the major standard clauses of export order
Q3. The Indian Exporters are given certain foreign exchange facilities outline the same
Q4. What do you understand by foreign exchange .Explain different types of possible exchange rate regimes?
Q5. Outline the factors affecting exchange rate
PART – C
Q1. Export finance is important to be competitive do you agree with this statement. What are the means of short term financing?
Q2. Outline need of export documentation Explain major shipping documents needed in export transaction
Q3. Explain major steps required in custom clearance of export shipment
Q4. What is the role of clearing and forwarding agents in international trade
Q5. Explain in detail major Inco terms used in export transaction
CASE STUDY – I
FEMA ALLOWS DEALERS TO MAKE REMITTANCES FOR GENUINE DEALS
FEMA, the improved version of FERA, which has come into effect from June, does not do away with exchange controls as such. Nonetheless, it puts an end to the archaic system of sending businessmen and managers to jail for civil offences.
The substitute of financial penalties is better even though the quantum of penalty does not reflect the low national cost of generating foreign exchange. Welcoming the new Act, Fieo Chief, Navratan Samdria, has said that the new Act recognises the export contract. There are no artificial limits in the law for agency commission or buyer claims. The actual incidence of these is left to market forces. Agency commission in the case of rupee trade is, however, not allowed.
The invoice value is no longer sacrosanct; it is a mere reflection of the consignment at the time of drawing upJhe bill. The actual value of goods is a function of time and place, the actual sale proceeds depend upon the market situation. However, the new thinking should be reflected in bank procedures and also the mindsets of the customs and DGFT officials. They are fixed to the invoice values and bank realisation certificates and do not wish to hear anything else.
In the new FEMA rules, business travellers can now avail of. minimum of $5,000 forex with minimum documentation and paperwork. The limit has been raised from the current level of $3,000.
There is new GR/PP form, which should be used in all export documentation. As of now, the RBI has asked exporters to continue with the old forms after modifying them for the FEMA undertakings. The new set of GR/PP forms will be provided to exporters shortly.
On the import side, authorised dealers have been given permission to make remittances for all genuine transactions. In case of doubts on the authenticity' of the transaction, dealers have the right to refuse to deal with the importers, provided they do so in writing.
Exceptions to the general permissions for import remittances are under Schedule II and Schedule II! of the FEMA rules, which cover cases requiring permission from union government as well as situations where monetary ceilings are prescribed.
The important point in exchange control on imports is that RBI approval is required for supplier credit beyond 180 days. For credit below 180 days, no permission is required and the dealer can straight away send out the amount. Similarly, all cases of buyer's credit, which means advance payment for the goods in some form or the other, also require a RBI clearance.
The RBI has withdrawn itself from the task of prescribing documents for each transaction. The decision is left to the authorised dealer who must deal with each situation according to the ground level facts and circumstances. The intention is to control the transaction on the basis of undertakings and declarations rather than conducting another customs clearance at the banking stage.
Agriculture trade: The IIFT and the department of agricultural research and cooperation held a daylong meeting of agriculture experts recently. The well-researched backgrounder from NCAER showed up negative subsidies on most agriculture commodities, rice led the field at over minus 40 per cent. The state government representatives felt that imports were responsible for depressed agriculture prices.
Economists said that rise in state minimum support prices and the consequent difficulties in disposing the expensive purchases is bad for agriculture. Concerns of good security were topmost in the minds of the commerce ministry negotiators. They are looking for ideal tariff rate, which meets the interests of the Indian producers and consumers without compromising food security.
The commerce ministry is on a transparency spree, the main discussion papers on both the agriculture and services negotiations at WTO reflecting the tentative position of the" Indian government on the Internet along with other related material.
Anybody can visit the site in the nic.inserver; one click on the commerce button is all that is required to download the material. Suggestions and views can be sent on the Internet at the Webmaster address. Given the limitations of the negotiations, cogent reactions will strengthen India's case at the WTO forum. The views will also build the consensus on reform in agriculture.
Furnace Oil. The DCFT notified Rs 780 per tonne as the industry rate of drawback on furnace oil supplied to 100 per cent EOUs and export processing zones. The measure reimburses the duties suffered by the deemed export on the fast track route. The brand rate alternative requires verification of the actual duty paid. The DCFT action is especially welcome because the duties suffered are rarely reimbursed by the export promotion system.
Sodium Cyanide. The revenue department has slapped a stiff anti-dumping duty on sodium cyanide imports. The final duty is Rs 68.025 per kg on all imports from US, EU, Czech Republic and Korea. The 16 per cent countervailing duty to compensate for the excise duty suffered by domestic goods must also be paid on the anti-dumping duty. In other words, another Rs 10.88 per kg must be paid as countervailing duty due to the anti-dumping duty of Rs 68.025 per kg. The short paid provisional duties will also be recovered as the customs shoot the demand letter out.
Questions
1. Does FEMA allows better flexibility of all export and import Transactions .
2. What Role does agriculture trade play in International Trade and Negotiations with WTO.
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