Business Aptitude: Economics Questions for MBA Placements

Ans: B

Explanation:In economics, a desire for a good or service becomes “demand” when it is backed by the ability to pay for it (purchasing power). Utility refers to the satisfaction derived from consumption, consumption is the act of using up goods and services, and scarcity is the fundamental economic problem of having unlimited wants with limited resources.
Correct_Option:B

Ans: C

Explanation:In a perfect market, there are a large number of buyers and sellers, and each individual buyer or seller is so small relative to the market that their actions have no impact on the market price. They must accept the price determined by the overall forces of supply and demand.
Correct_Option:C

Ans: A

Explanation:The Harrod-Domar model emphasizes the role of savings and investment in economic growth. The First Five Year Plan of India (1951-1956) was heavily influenced by this model, focusing on capital formation through increased savings and investment to accelerate the growth rate of the economy.
Correct_Option:A

Ans: D

Explanation:Supply-side measures aim to increase the availability of goods and services or reduce the cost of production, which in turn can help control inflation by shifting the aggregate supply curve to the right.
Option A (Curtailing public expenditure): This is a demand-side measure. By reducing government spending, aggregate demand decreases, which can help control inflation.
Option B (Mopping up excess liquidity through taxation): This is also a demand-side measure. Higher taxes reduce disposable income, leading to lower consumption and thus lower aggregate demand.
Option C (Credit control measures of RBI): These are primarily monetary policy tools that affect the demand for money and credit. While they can influence inflation by affecting aggregate demand, they are not direct supply-side interventions.
Option D (Maintaining price levels through ‘administered price mechanism’ and ‘effective PDS’): Administered prices are prices set by the government (e.g., for essential goods). By controlling these prices, the government directly attempts to manage inflation in specific sectors. An effective Public Distribution System (PDS) ensures the availability of essential goods at affordable prices, which can mitigate inflationary pressures on the cost of living and improve the supply of necessities. These are supply-side interventions as they directly influence the availability and cost of goods or services.

Correct_Option:D

Ans: B

Explanation:Certificates of Deposit (CDs) were introduced by the Reserve Bank of India in 1989.
Correct_Option:B

Ans: B

Explanation:Elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in its price. When elasticity is 0 (Ep=0), it means that the quantity demanded does not change at all, regardless of any price change. This is characteristic of perfectly inelastic demand.
Correct_Option:B

Ans: A

Explanation:The Export Policy Resolution, 1970 was a significant step in India’s economic policy, aiming to boost exports and earn foreign exchange. It recognized the need for sustained growth and expansion of export-oriented industries to achieve these goals. The other options are related to different aspects of economic regulation: MRTP (Monopolies and Restrictive Trade Practices Act) focused on controlling monopolies, IRDA (Insurance Regulatory and Development Authority) regulates the insurance sector, and The Companies Act deals with the formation and governance of companies.
Correct_Option:A

Ans: C

Explanation:In the context of the transportation problem, a maximization objective can be converted to a minimization objective. This is achieved by transforming the cost matrix. To do this, we find the highest element in the entire cost matrix and subtract each element of the matrix from this highest element. This effectively reverses the relative “values” or “costs” such that maximizing the original values becomes equivalent to minimizing the transformed values.
Correct_Option:C

Ans: C

Explanation:In the North West Corner Rule, after allocating a value to a cell (representing the intersection of a row and a column), we check if the demand of the column or the supply of the row has been fully satisfied. If the demand in the current column is satisfied, we move to the next available column. Since we are dealing with a matrix, the “next column” implies moving to the right. We then consider the next available cell in that next column. However, the question asks where to move *if the demand in the column is satisfied*. This means we have fulfilled the requirement for that column. According to the North-West Corner Rule logic, once a column’s demand is met, we no longer need to allocate any more units from any rows to that particular column. Therefore, we move to the next column to the right to find the next cell for allocation. The rule also implies that if the demand of the column is satisfied, we can move to the next row in the same column *if* there is still remaining supply in that row. However, the question specifically asks about satisfying the demand in the *column*. When a column’s demand is satisfied, we have completed our allocations for that column from all possible rows. Thus, we move to the next column to the right to begin allocating from the remaining supply. The options provided don’t perfectly reflect this nuanced movement as the rule can involve moving to the next row in the same column if supply remains. However, given the options and the premise of satisfying column demand, the most logical next step in a matrix traversal context is to consider the subsequent column.

Let’s re-evaluate the standard procedure. When demand in a column is satisfied, it means that the entire demand for that column has been met. If the supply in the corresponding row is *also* exhausted, we move to the next row and the next column. If only the column demand is satisfied, but there is still supply remaining in the current row, we would move to the next column in the same row. However, the question is phrased “if the demand in the column is satisfied”. This implies we have found a cell and allocated to it, and the sum of allocations to that column now meets its demand. If the demand is met, we have finished with that column. The next step in the North-West Corner rule is to then consider the *next column* to the right for further allocations, and potentially the *next row* if there is still supply remaining in the current row. Considering the options, if the demand in the column is satisfied, we’ve addressed that column’s needs. We then move to the next column. Therefore, a movement to the right in terms of columns is implied.

Let’s clarify the standard NW Corner Rule progression:
1. Start at the North-West cell.
2. Allocate as much as possible to this cell, limited by the supply of the row and the demand of the column.
3. If supply is exhausted, move to the next row.
4. If demand is exhausted, move to the next column.
5. If both are exhausted, move to the next row and the next column.

The question states “if the demand in the column is satisfied”. This means step 4 is met. According to step 4, we must move to the next column. The question doesn’t specify what happens to the row. However, among the options, “right cell in the next column” or “left cell in the next column” are possibilities. Since we are progressing through a matrix and have satisfied a column, the natural progression is to move to the next column to the right.

Let’s consider an example:
Row Supplies: S1=10, S2=20
Column Demands: D1=5, D2=15, D3=10

1. Cell (R1, C1): min(10, 5) = 5. Demand D1 is satisfied.
Now, we move to the next column (C2). The supply in R1 is now 10-5=5.
So we would be looking at cell (R1, C2).

2. Cell (R1, C2): min(5, 15) = 5. Supply S1 is exhausted.
Now, we move to the next row (R2). The demand in C2 is now 15-5=10.
So we would be looking at cell (R2, C2).

3. Cell (R2, C2): min(20, 10) = 10. Demand D2 is satisfied.
Now, we move to the next column (C3). The supply in R2 is now 20-10=10.
So we would be looking at cell (R2, C3).

In the example above, when demand in C1 was satisfied, we moved to the *next column* (C2) and stayed in the *same row* (R1). This corresponds to “right cell in the next column” if we interpret “next column” as moving to the right and the “cell” being in that next column.

If the demand in the column is satisfied, it means we have allocated the entire demand for that column from the available supply in the rows. The standard procedure is then to move to the next column to the right, and continue allocating from the remaining supply in the current row.

Correct_Option: C