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Business Economics
Jun 2025 Examination
Q1 Rahul operates a thriving coffee shop in a busy commercial district. He observes that a small price increase in his premium espresso leads to a sharp decline in sales, while a similar price hike for regular black coffee has minimal impact on demand. This variation in consumer response raises a crucial question: What factors influence the price elasticity of demand for different products? Analyse the key factors that determine price elasticity, including the availability of substitutes, brand loyalty, income levels, and consumer preferences and habits. Based on these insights, how can Rahul adjust his pricing strategy to enhance profitability while ensuring customer retention and satisfaction? (10 Marks)
Q2. Meera is the operations manager of a fast-growing organic food company. As her company plans to expand into new markets, she needs to forecast future demand to make informed capital investment and expansion decisions. Since the company is launching a new line of organic snacks, historical sales data is limited, making traditional statistical forecasting methods less effective. To tackle this challenge, Meera explores qualitative demand forecasting techniques that rely on expert opinions, market research, and consumer insights rather than past data. Evaluate the key qualitative methods of demand forecasting that Meera can use in this situation? (10 Marks)
Q3 (A) A local bakery sells freshly baked muffins. When the price of a muffin is Rs.10, the bakery sells 50 muffins per day. However, due to an increase in ingredient costs, the bakery raises the price to Rs.12, and as a result, daily sales drop to 40 muffins. Calculate the price elasticity of demand (PED) for the muffins. Evaluate how can the bakery use this information to decide future pricing strategies (5 Marks)
Q3 (B)Riya enjoys both chocolates and cookies equally but is willing to give up two chocolates for one extra cookie while maintaining the same level of satisfaction. Using the concept of indifference curve analysis, analyze the above scenario and discuss the indifference curve and its properties in detail.
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