Q8 of 30 Page 1

“In a hypothetical market of mobile phones, the brand AWAAZ was leading the market

share. Its nearest competitor VAARTA suddenly changed its strategy by bringing in a new


model of the mobile phone at a relatively lesser price. In response, AWAAZ too slashed its


price.”


Based on the above information, identify the form of the market represented and discuss any one


a feature of the market.


Or


Discuss the primary reason for ‘indeterminateness of demand curve’ under the oligopoly form of market.

The situation described here is of oligopoly form of the market.

Oligopoly is a market structure with a small number of firms while none of them can keep others from having significant influence.


Although only a few firms dominate, it is possible that many small firms may also operate in the market.


Example: there are many mobile phones producing company, and some even sell the products at the same price. So in order to increase its demands some offer lucrative offers.


Or


In the Oligopoly market, there is a small number of big companies. So the policy of one company or strategy and offers of one company impacts other company. So we often see in the market that when one company reduces the price of their product their rival company also reduces the price.


This interdependence makes it difficult to draw a demand curve.


More from this chapter

All 30 →
6

State the behaviour of Marginal Physical Product, under Returns to a Factor.

 7

Using appropriate schedules, briefly describe the determination of market equilibrium.

 9

a. Arrange the following coefficients of price elasticity of demand in ascending order:

-0.7, -0.3, -1.1, -0.8


b. Comment upon the degree of elasticity of demand for Good X, using the total outlay


method, if the price of X falls from 18 per unit to 13 per unit and its quantity demanded


rises from 50 units to 100 units. (1+3)

 10

Identify which of the following is not true for the Indifference Curves. Give valid reasons

for the choice of your answer:


a. Lower indifference curve represents a lower level of satisfaction.


b. Two regular convex to origin indifference curves can intersect each other.


c. Indifference curve must be convex to the origin at the point of tangency with the budget


line at the consumer’s equilibrium.


d. Indifference curves are drawn under the ordinal approach to consumer equilibrium.


OR


A consumer has total money income of 250 to be spent on two goods X and Y with prices


of 25 and 10 per unit respectively. On the basis of the information given, answer the


following questions:


a. Give the equation of the budget line for the consumer.


b. What is the value of the slope of the budget line?


c. How many units can the consumer buy if he is to spend all his money income on good X?


d. How does the budget line change if there is a fall in the price of good Y?