KSLU Solved Question Papers
Managerial Economics
Previous Year Question Paper with Solution
B.B.A. LL.B. (Five Years) · Sem 1
2019 Dec Examination
munotes.in
Mumbai
B.B.A. LL.B. (Five Years) Sem 1 Managerial Economics 2019 Dec Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2019 Dec examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2019 Dec examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2019 Dec examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 80 · 20 questions answered
Instructions printed on the paper
- N.B. (1) Answer all five Units. (2) One essay type question and short note/ problem is compulsory for each Unit. (3) Figures to the right indicate marks. (4) Answer should be written either in English or Kannada completely.
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
Unit I
(a)Define managerial Economics. Explain the scope of Managerial Economics.[10]
Answer
For full marks, cover: a definition of managerial economics with its source; what "scope" means here; the micro-economic areas (demand, production and cost, pricing, profit, capital), each with the questions it answers; the macro-economic environment the firm must read; the tools the subject borrows; a worked example; a short table; and a conclusion.
Definition
Managerial economics is the application of economic theory and methods to the decision-making problems of business firms. Milton H. Spencer and Louis Siegelman (1959) described it as the integration of economic theory with business practice. Its purpose, they said, is to help management in decision making and forward planning. Joel Dean's Managerial Economics (1951) is usually treated as the first textbook of the subject.
Meaning of scope
The scope of a subject is the range of questions it deals with. Managerial economics covers every business problem that economic reasoning can help to solve. Its scope is wide, but it can be grouped under two heads. The first is the internal problems of the firm, which are micro-economic. The second is the outside environment, which is macro-economic.
A. Internal (micro-economic) areas
1. Demand analysis and forecasting. The study of what decides demand, how sensitive demand is to price and income, and how future sales can be estimated. It answers questions such as: what will happen to sales if we raise the price, and how much will we sell next year?
2. Production and cost analysis. The study of how inputs are turned into output, the laws of returns, and the behaviour of cost in the short and long run. It helps the firm choose its scale and method of production. It also shows the output at which cost per unit is lowest, and whether expansion will bring economies or diseconomies of scale.
3. Pricing decisions, policies and practices. How price is fixed in different markets, and the policies a firm follows in practice: cost-plus pricing, skimming, penetration and price discrimination.
4. Profit management. The nature and measurement of profit, break-even analysis and profit planning. Profit is the reward for risk and the test of a firm's efficiency, so planning it is central to management.
5. Capital management. The choice of long-term investments through capital budgeting, using methods such as payback period and net present value. Because such decisions are large and hard to reverse, this is among the most important parts of the subject.
B. The outside (macro-economic) environment
A firm does not work alone. Its sales and costs depend on the economy around it. So managerial economics also studies:
- the level of national income and the business cycle;
- inflation and interest rates;
- taxation, trade policy and government rules;
- international conditions such as exchange rates.
The manager does not control these factors, but he must forecast them and adjust his plans.
C. Tools the subject borrows
To do its work, managerial economics borrows tools from other subjects. From statistics it takes averages, trends and correlation. From accounting it takes cost and profit figures. From mathematics it takes equations and simple optimisation.
The scope keeps widening
The boundaries of the subject are not fixed. As business changes, new questions come within its scope. Today these include the analysis of large sets of sales data and the management of risk from volatile input prices. They also include the economics of online selling and the cost of meeting environmental rules. Each is an application of the same economic reasoning to a new problem. So the scope of managerial economics is best described as every business decision that economic analysis can improve.
A worked example
Suppose a paint company plans to open a factory in north Karnataka. Each part of the scope plays a role. Demand analysis estimates paint sales in the region for the next ten years. Cost analysis compares a small plant with a large one. Pricing analysis decides whether to match the leading brand's price or undercut it. Profit planning finds the sales needed to break even. Capital budgeting tests whether the factory earns more than the cost of the money invested. The study of the environment checks the outlook for house building and interest rates, which drive paint demand.
Scope at a glance
| Area | Question it answers |
|---|---|
| Demand | How much can we sell? |
| Production and cost | How should we produce, and at what cost? |
| Pricing | What price should we charge? |
| Profit | How much will we earn, and when do we break even? |
| Capital | Which investments should we make? |
| Environment | How will the economy affect us? |
Conclusion. Managerial economics applies economic theory to business decisions and planning. Its scope covers the main decisions of a firm: demand, production and cost, pricing, profit and capital. It also covers the economic environment within which these decisions are made. Its boundary is set by usefulness. Any economic idea that helps a manager decide better falls within it. That is why the scope keeps widening as business becomes more complex.
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