Eefa

EA*H,,.t tcs pFI{t $ s*tgie$v# fi{}}.r.r{:,g
**p:erfmac,*a* *f F"f ;rxag*emnf $twdi*s
l:L&s*:,ij1"&ry
seri;imt {,.*rtr: fttG f4S3 }egreefErxnch: E..IBICH { IT i
;terF-qi*ctN*xre: El.i*rfdEERrNG EcoH*l.,ii{:$.t&.r} FIHAFcI;L}, AceoisTING
Ymr/$em: $14/VSgM
T*fxI *a of IIr* ln Syllah*s:
tecrure.45 + 1rrt*FL*g*6
Crard Tetuh Sl
ii';rrcail-x : T'. fr,tLi: E{li hf IT ELA
Ac*rl*mit;,*ar: X$131*
Seruester: Gdd
olr'ie#ive: Tfus suhieet will introcl*+e fhe ba-eic conceptl of lnanagerial econ*nri*s a*d equip students toLlar*,lrlpafe lliord suLlce'csfirlly in ifte iltcrea-singly t no".ie*s; ;;--"d;fu furt*idepsridffit .el*tlal e+onomy *f the21" *err€r1:. Itprar"id*s a bs{fer urd*t*Grg of fhe A***ori*utuSic. dsfitand and supply of producls.productio* - pracels a:rd c*st corcegts, prr"i.rg-*A firrarr"i;i;;;;"G
Thlx rni* frtraduter the ha*lc c*nceptn cf lt{anagcrlal Ecanrn**cs &,its relaflsrshfp x*dr offter di*cipllnes. .dnd
}ifiilJf*ffi:*';t1fH::S#'fiffi;I;;il*T#ffiandlekio&*unte.rl'*vcri+usrypes*rnrms
TCPTC
Uuit- I : Intr*dffi
UnitII:n@
In thls unit the Demand-and saBps for prodrrcfs and serylcus in varlous lndustrtcs, lfu types, F*etcrs affecfing tftedenrand and suppty are dl*cnssed- de;ffi**asting and tts ruethods are dlscussed fo dc{flil.
NO. OF.' i nur.ups
LECTURE I nrcr
IioriRs I nooros
R-elation-rhip with other disciplines
Fiuns:t;@
tvianage@
scope@
B+,ond s1'ltahru
Derr- orid - B.F"s;fmard
DetenmnanGEffiffi
Demand F*i;i@d*ssteps
Itfethods of nemand foreGtrrg
__D uppf.y- - .Dcler}lrurar rtu uf supply
:'-irrrlji: | ;r*^
issue lia;
)

]
| ;- -l' slrrpt]'*"I*ii'-ili'
iri
i
I
1r--l
Lirurs ua1 SupPi-v Cur*-es
ne1'onri ryttr,Gr<
Totai
1
li d-1-
U-
tI Handrxits
1*+ I
se* of,
ntirn,
Linit -
This t
Prtdt-r
au* itt
III: Fruduction antl costAnalYsis
Ilrif de*cr.ibes *hcut the Tlreories *f PrsdEcfi*n, its ftilrcfisn itnd cptimiantiDllJ The managerial u
efi&n are disrusse.d in dofail The ahjeclfoes alsr include undersfailding the t$nreptr+ tf tost {rpes, *'stint
r sfgnificanco.
Praduction fi:nction
I LI 796
I
ffi
ffi
I T3 323
a
I IL 1t i
3
II TI 1i-
1U i
Ivianagerial uses of producfron tunctron'
ffi
@
ffi
I i'l 167
_1
I T} 183
6
1 T1 1A<
i17
b
I Ti
I
T2 351-
?62o
I
LL
,}o,
JOl-
396l-ffifi"-,"e of Cost in manageiial Decision'I/l
t Handouts
1i BeyondryllaLtru
Total
10+l
g mdhods in Practice, Rote 0t
ffi
Uftit i
't hls I
G+ven
[V: Frtclttg
rnit gives hrif{'idca ahout Pricing rfin'trent rnartrst struclure and Pricin
ume*t in Prlc-ing contrd.
I PC; D"-telrnEatrrts
@es.
Differefl t market Shrrcti$e.
#.----._.:-
Prioing Discrtrunatron
Fricing methotis in Practice.
Beyonrl Sl4labrs_
Total
I
1
II
IL
TI
t+v I
I
I
I
443 i
i
I
18? I
3
1
a T1 187
4
I
'r2 602-
603
I
.}+I
Hanttmrts
6
UnitY : Finarcial Ac*ounting
Tkls *nit expl*lns Accou*ting whteh Le * enHial prceess for the sufce*qs sf businefs*'f, $lhitlt will er*ploy sisahle
arcer:ettrg drpartme:rts- it i*-irrt"o*o**u thn .S-."*rrrrf:ng Equattte, Er*a*te Shed, [',cerce Stats$r*nts' Debtfs ar:il
Credits, finU fmw Sfatement *nd Cash FIow Statem+ul

ij--Tit+mffi*-
l*_i
:ssifimlia* nf *cc*xnts, P,aGr-.ce *tr
li-iiiiil
: ,: ' i'ii1i,i itiiil ii,.--. slii'ui.l:.;iii .t Tr:iaj
'baia:rcc
i
i .-*:lfi.r:
1it"'j---r- * _,.-- ] __ _J
, j ; ii .;tti,
I
i J I iliustratrar:s - l.rt.-fli an<i io::s statemett dr,1di Lraiafl;t
!l
i I r Firi;lrirrll ti*n tn.,llf,ii.
t,
iiir-ir.ir:rii,.:tis - F:llririai tati+ ;x:rai3.'sL
Caxir ilolr, iuiiilysis
'i.,: t :1
Linit-:vIl Capi€ai Burige,rixg :
l-i-i,l lT5 169 I
lii--i
h,Iceraw Hill puhlisiring Ccrmpany Limited. New
Ihis unitu helps fc understand the irnportauce *f eaptf*tr hudgeting snd tle sonffFts underl5ing strrteeic ard eapttalirrverfirrcrrf rlmldans- It alto explaft* flre risk* and rr{urn* rrrrrro-*o tn lrwesfineili Ded*lons.
REI'ERENCF,S:
l. Samuelson. Paul A and Norclharn $/.D.. E+onomics'. Tatfl
Deihi, ?SS4.
2 McGuigarl f,'foya"and-Harrit, 'Managerial Economics; Applicatiors, stategy and Tactics,. Thomssr south
Westent,I0tlr Edition,20$5. :
3' Paresh Shah" 'Ba-sic Financial Acsoftlths for Managemenf, Oxford {Jniversity press, New Delhi, ?007.
4. Salvatore Donrinich 'Mmagerial Econornics in a glolrai econonrt'. Thomson South &.etenr, 4t]r Edition,
2001.
5' Prasarura Chandra. 'Fimdenentals of Fmansial Managarenf, Tata Mc.grarg Hiil pubiishine Ltd.. 4th edilrorl
2005
J; r.1L*:
T.MADHITMITHA
Ii}rstrati*ns - C'ash flswfursl}.sls T5 l- Ro
I Fl-mds ilrrrv r:r;rd,r.iiS
Uompaiadvc fi naiicial siatemeni;
] Notrs
To
I tf^]^^r t u[trJ
t,t1
statement.s
Beyl*t6 $.llabus
t j Notes
I
1 I Handculq
1
lnveshnents
I
.r< 1(r 1
zaL
a
Risk and reLni evaluation ofinr,'estnent decision
L
l 71..,,g1nge r"te Of i
1
T-5 199-
215
1 T5 297
ytrrtuu
1 IJ t>4
IJT rueITIiu rare ot remln I TJ 283
6
lule
I Handotrts
at I
45+6
1
o
I T5 :rl
7
!
I lI.*l
l
l
5
Beyand Sltabrrs
L

t'
S€i-+?4S: LlFjC.=q=aEFlRiNG Fr1{l{}:*Et}&,lIC,! :ilI{S iTLNAISC}AL -q{_,i_.€=}trNTI}{# i, ,}.F
C
LII{TT I I$TRCI}LTCTISN S
3{tfl3
|da;raeeriiil E*onomics - R*l+ti+:rshii: r-::itl r.:tti*r di.t+ii:linss - F.irms. T].prs. 6lr_iectivesend g,:als
l"dr.ncgerl;;i drc jl:*;s X,r. ,;: *n ;n; j.,,Jls
LIF{IT II I}E&.{,LNS & SITPPLY.&NALY$IS 10
Demand - Tl'p*s of d*'rnmd - Ilet*rminanh of demand - Demand function - Dsnanci*la*rticity -
Deffianc fi;recasticg - suppry - Detemli*;:nrs cf supprl,, - suppl.; functi*n s"ppil;i;C;;"'
UNIT }TI PROI}LICTIS}{A}{I} CSST AI{,{LYSIS 1S
Produdion firnction * Retums to sc*ie - Prcduction optimrzation - Lesst cost input -Isoquants -
Manageriai usos of prt:tluciion function.Cort Conoepis - Co* function - Deiermin-"r-
"i-.*, -
Short run anri Lrtng run co"';tcun es - tlost {)utput Decisic}fi - Estirnati+n af Ltost.
LIIIT IY PRICI]$G 5
Detenninanls of Price'- Pricing under different otrjectiles +nd different market strur-:ture-q* pric*
discr:imination - Pricirig methods in practice,
UNIT Y 5'II{ANCIAL ACCOLWTING GLEMENTARY TREATMENT} 10
Balance sheet and related c'*rtcepls - Prallt & Loss Statement and r*f *t*a
""ffiis - Financial
Ratio Anaiysis - cash flow anaiysis - Funds fioiv anaiysis - compararivefinancial starements -
Analysis & Inter-i:ret$ion of financial staternents.
TINIT VI CAPITAL BTII}GETING. (ELEMENT.4.RY TREATMEI{T} 5
hvestments - FJsks and return evaiuation of investment decision - .Averege rate of rehmr-
Payback Period - jrlet Present value - Iniemai rate of retum.
r)
T*TAL: 4s PERI(}DS
TEXT BOOKfi:
1' liamusison' Paul A and Nordhans ry,f)., Ee,rnomics', Tfl.til hfcgrarv Hill puhlishing
Company Limited. Ne+"i Delhi- 20C4.
! }{Guisaa :{o.l'er and_Harris. ..{anagerial Ec.oaomics; Applications. Strateg3..and
Tacti.csr, Thomson Soufh l.Vesf*r:1 1Oth ErJiti<:n, 2*0S.
3. Faresh shah. 'Basic Financial Accountine for Management,. oxford unir,.ersity press.
Ner*-Delhi, ?fi0/-.
4' S$ivatore Damiruck- '{aneg*rial Eccnrrmics in a global economy'. Thomson South
l&esierq 4th Edtion, 200i .
5. Prasrnna chandra. 'Fundamrntals ofFinancial h,Ianagement'. T#a h.{ceraw Hii}
P;blishing Ltd., 4th ediricn, Z*05.

]
TW{} R6ARK +EJESTIONS ATqB ANS1TERS
LrmT - t
EASTC ECCiH{iiViiCS
i" fiet*ine M*nagerial Economics
p,V ccmhini*g fhc hasic drf;aitinn af thc ls.'c tclit?. "!"{anagcr" and
..Ec.oftomigs,,
].ou gat the det-inition c,t' "rrar-rageriai ecorromics" "iviarrage'riai
F;crmomics.' is ihe *tr.ry
"t
directing resources in a rvay that it most effrcientiy echier'res
ihe i.;rarrageriai g+41:.
h,ianagtaiai Ei;oiiurnirs is also firc appiicaiio* oi tiie iaois of ecolruiilioe
anaiysis in decisirxr making in aetuai inrsifiece situstione.
2. fiefine Economlcs.
Adam smiihrs Wesiih deiinition - F,ccncmics as the science of tt-eaith
.F.conomice la,vs down the gninciples tn mske the penpie cnd the sovereign rich ' The
sci".nc+ pro.,ride ways err6 gItcgtts r:f getting pteutfirl fEvslme ta the st*e and mare
pr'ap,ttty-'riiu 1r*PiE .
fr;fnrsheii,s Weii=nre riefinition - n *tudy oimsnkind in the oniina-v husinese iiie - It
e::a:rihes d:st pa:-t of iiidividr;e! *sd s+r.ia! ac.tisc wti,:!i is mosf *losely r:qrrurse'itrJ ttith
ihe aitairunent arrri witii tire use of rnatetiai rraqui*itrs crf weil behg
Iirmel Rohhin's Scnrcity definltinn - F.cnnomicfl a.s a science wiriuh siuriies hurnrn
be.ha.vt*r as a rel*tioeship trete'eea end-,s asd sc.arce rsea: x"hi+h have +ltervrali'rs r-rs*
s. What is Businesc frecision Makiqg?
Bri*furess Deci*ic,nl,ltakieg invahes. cheices he{weeavai*tr* colrf,seE +f acti*n* and
ifte.sc choiccs Frrrist be rrrade in the errvironnrent o-rrer ir-irich the eiecisbn nraker hras
limiteci or evefl no cnntrol. Such conditims of the envircrtment are csiied statff of neture'
Ncrrmalty bg*iness decirirme hsve to ile taken rrcry ciearty otherwise the riecision rnakei'
has to fsce some co!18€que-$ces.
4.Yvhat is m*rginal anaiYsis ?
lv{*6inat atraly*is is thc anarsis of ftc hc,ncfits of ccsts of thc maryina! units af th*
urput anJoutpui- "it ir is a teciii-riqris *-idei-v iit6d ls bueiners decision mahir€ anii tieli
tig-,h; *""'t, ai economic thought . To rio a tnarginai analyeie rn'e hsve to change
verieble s.r+h ss qua*tity *f gcad *.hat &e firet bu3's, drs q.lantity cf the +utput the';-
piuduoc , tire qruniiry oiarr irrlot drey us,nri attl i iirere vaiiatrle ar€ Es-oafiy i'efureed iiiey
ac controivgriahies ,!
5. Stete the Law af Eiminishing toIarginat utlllty'
I aw af diminishiag ma"girut-utility statcs tlrat wlfh -oucccssi'..4 ittcrcaqcs ia thc
unite of consumptior of a commsdify, e,vsly additionai unii of lhat conrrrroditv gles
iesser sdie'iaction to the c{xr$rflrer. trlnsusnptirn heyond point of satiety i-e--, maximurn
s*tisfecfi+i'r o*!y yields !'!sgatir"'e :i-rarginal stiliry.
6. llitrat is Equi-marginal utiiity?
A cnnsr:sncr max-imircs his tata! utiti$ lry allncafing his hcamc afttrfig grvrds and
services(inciuriing ral'ingsi avaiiable to irim in urich a vv?y ihai itre_rrrargimi uiiiiiy iirr
ruflees *,.r"tit .rf ,ire g*; *qr"is the marginai utiiiry per nrpee'* wnrth of eny other good'
'-l 1
L:jl

7. lYhat is meant by fulicra eecnomic *naiysis ?
.t&ci'* **o*ro** arialysis dea.i* ':i'ith the p'r+t'leiin: of an bdi";iduat fic+
il.tdi:siry or corlsutr-r", *i"" It ireip ifl dr.aiirrg wifir issues wirich go orr wiiirin irie ikr* *uch
ae putting tite i.esoufces svaiisirie s,,ith the firrr t , its hest raee, liioctiiflg fesources within
a:.3r18!ls astir:ities C,f th€ firm tc ii-". b'es-t *se, all+*etieg ielsr$€€3 e-ithia =;-egis$* *etip'{tie*
oiiirc fiirri atni aiso,Jeai* witir briag ieciuricaily anri e+;*ortio*iiy *ffieient'
8. =*-hat is meant by Frescriptive approach ?
i1-rcs-cripti'--c apg+aclt dcscnhcd it tcrms and cnnditir'tas
Frr*criptite or-normaiive appr-oach teiis "IIow ihings ought io be rioffi"'
9" *rhat is me*ni hy dcseriptive *pprnach ?
I]lcecl'tptivc apgraach r{cxcdbcs in u'tct fricndlr; fi! afifi cr
De-scriptive approacir teiis "how things are done"'
i0. Scope of hrtanagerial Econo*ryt
Tlc fr:llo*,irr-g
"rp""t*
constiirtc tftc scapc of managcnal caonomics:
i- Objectiver oia buriners finn
7- Irnrarri anaiy*is and icrrcca*iing
3- Cost ana!5'sis
4. Prtxtrn:iicln tiarragerreni
5. iirryTliY uratYsis
6. fricing deci-qia*s, p+lieies arrd praetiees
7. Frofit uaflagGtrEent
if. ().t1rital htrdepting srd inr'eeiment decisicmfl
9. Decrsiori *re*}rf ulder unc*rtainfy
l0- Crmry$itkrn
il. Give ihe Ohjectives of a businss firm
The otjeetive* of * tn:sfor**s fiI?n cray tre v*rie{' APaft &cr'm generding prefits a
firm trar m,ny otirer oblectives iike beiqg a rirarke; teader ' t'eing a cost leader' acirieviqg
supefifrf efficiercy, achieving *,ryr*ti* quality, achieving stry€fiof crlctfimef
lespcra*ivenegs etc.
12. What is metnt hy $upply Analyeis?
.Siqp* *uil.Ti*-rfuui*"with the vmi+us aspect'* +f s*pply of a cornmtdfu' Ce*ain
irnporiaai a*pects Jt'Eupptl anal-Vr1s are mrppiy schedute' €urvcs and furrctior' eiasticify
.firqrrrty, iawaf srqryriy.*.6iec iityiitatiofls mrifactcr* infiuencing eurriy'
tr. Yuhac is meani by Capital Budgeiing 7 -
Capita! Ua!"t is mcrnt ty ttrc-ptanning of expcnditutc ou asscts' Thc tctm
Capital Budgeting is ussd irrtercharrgeab* q6i capi'of e:rgendifare ry1nag.en-reni
capital
expenditrre deciekrn, lcrng term lnwstment decieinn, managemertt of fixed aecets' €tc' It
may be d.efiEred as "planniag er,,eluatie$ and eslec.ticri cf capitel E,-.Peuditure propo*als'"
cqrwttr*dgeting invoives a euntr-rt cr-atla,v- Ilt 8e1're$ a* ou'tiays of ta$t iusoupes fur
tai* frrr ett snticipatedflow of fi*n'e iwnefitq
!.4. r--k* +f E*gineerft:g Ee*uemies:
ll

b

F,ngine*ing ecrxrnmics accompiishes sevefai *hjectives. it gnesents the espects of
traditiraai e*csi.-3fliies tiral ar* rei*.,'ai:rt fr,i 'i-',Esiress arrd eiighc*rhg 'it*isia::. nrai'j:ig ir'
re*iiiti*.
i5. Ilreiine Logisticsr
I:-rgistils is dcfincd a.c t!?c rti;r.'cmcnt r:f gor:dr 6'crn orir- piaec 2n t1r..c *tyct'
i6. Defrue Inimund Logistics:
Irrb+teril t'rgir:.i*= ie d*f'$*'i' a* .*.e irri:Y€tYlP*rrt +f sae" sraieri*ts ta the fa*t*ry
pieiriises.
17. Iiefine Gutbcunri iogistict:
Cr,=rtbe*sd- t"gr*i..1":*. i.s defirr*d as the fir{}ai*{rrrerrt of fi:ri-"}rerl g++ds t+ w.halegatet +c
reiaii otitie.is anei io ifir tinal consumcrs-
i8. Ereflne Sintisiics:
liiatistics provrde the hacis frn effipfticai testing cri therrry- (ienel?lizations of
th*aq; caggl+t tu *nnupiuri fi:r practice +sr!.sss these t&.earies ars EheEked agairret the d#'a
irum 6re rcaiiiy. Thi* wa,r, tiret-rrirs ireaanre rnore gxacii*ai anri u*eful ill reai iife busine*s
situ#iffi.
i9. trefine Economics and deiine tire divisions of Ecoroffilc$:
F,ccmcrmic"e ha.c t1o tiivi.qicns namely micro economics anri macro ecotnmice'
Mirro r,.r-rryr*ri.:,g is th* hranch of ccon(ruics r+'here tha irnit of shdy it an indir'{dttat ar a
fii-m wiiiie rnaoto esruiotrio* is lir'ariclr of econond*$ wlierp fire unit of siutff iri
aggregative in character and crmeid€ffi the elttife econfitly.
2u. fiefine nccouniing:
Acc*rmting *i. tu de{inerl a* the reccrding *f fina*cial op*atimr af m
organizatiorr- rnrarilgerial deciriorrs orr pi'crt-iir and sales etc. eieril6 input krgel-v tionrr tfre
accounting stat€ment of a frrm-
21. Elefine Manageriai Economics and &ittiremstics:
l!{any afthc thcarrics itt mattrcrna{ir:s wi!! find r.r"crj in cct-raomics- Conccptu such es
calcuiue, r.r+tors, iogariihms arui expone.niiais, rieierminanie and matrit algebra eic are
flffne to flsme a reri. Manageriai ecnnnmics is metrical in character- rt estimates varirnrs
econori:i+. relatieeslrlps predictiee relevasi *eoeornic quslititieE and ssce drenr' in decieioil
mairjng anti piuuring i,x. tire ftrture. Sr., nratlrenratios bc{rom6rt atr irrylontatrt tooi itt
manageri ai eccmotnics-
22. Feiine OPerations re*earch: -
Cgcratigtr* rescarch wa* dc.rrclopc.d as scicncc durittg thc Sccond tcrld War ta
soiw iir-compiex op€rations probiems oi planning arrd resonrce aiiocation in defbrrce
ffid in hs"cic in&rcrii* which epeciiicalty sufipiied military eguinments. These theeniee
fiid high ussgs in *;aricus field af nranegement tc E+l.;e prcble.nrrs pertainirg t* lcgisti+s,
botir iribormd anrl ouiircurid antt aiso iire nro-vrtieni oi rinattfiai wiihin ihe ftctor-v
prerT rises etc.
Zs. Define a comPetitor'
_)
----4,:[
il

Ti:e c+mpetitor:; *f the fi*n are aisc iiileiv io react $r erJerr pr*-aci ic :rn3r riecisior:s maie
l-rv the fitn- C.:'mi:.^aj+^-'^ ^l--'^-'-'--'- ita-irrale ij:e i,ii'i-ri-iaiitir.'; a/rvariac; c*ira,-l i-;... ll-,e:-r: .i!! :+ii i, .--..-.:i.
+:=!l!-.1_!: l1 ji:1?:!J ;: l! i !.i_i
l:-.---- T:---- ..- - - __.:!! !- - - !
iurti" iiiai riiarlagur'* svr-ii ita?e t+ {iiai.:e wi.sr iilvr.rinie*is in pr+jecr* iiiat wiii ire irai'-,i to
Irp rmrtatpal trai ttrF
^nfftEtltl^fi
J4. Lieiine u€{isicn theori* u$der uncertai$ty:
L;fnci tif t'he hirshess decisi..ns takee h',, rhe rlanageis. ai'e C..f,ne Liild€r
-------J-:-a- ,----l-=---1,---- ]::''-
:-is+.ii:i:-:El': r++i-t'+il '-:j =''ii'; iii';iiE*'i+ii :-+!= L
uirc.EiTaii-riy. Linc.iriaiirfies iieriairriEg io iierrrai-rii, cosi. -pl'rrs, prcriii, c,apfiai ea'c pre-.v'aii
rno.qt of the time tt'hen tlecision* sr* sna{ie. This makes tiri e,h$ie ri*cis.icrn rnaking
Fr+*e.*s .i:,ffie*it ar..d c,cirrple:1. Thre t+al+ +s+d h ee*nr...mi+ aeat-,,sif ha-r,e heen iii.:..{ffied
aiici i'e.fitirti :io i{-$ Eo take iiiiu ac'iorini iiir riiic.eitaiin-v aiid -rir*s iieip tiec.isiol* iniiliiig iii
t$grcst 3?!G ffcrgffirrrc m&mef-
- -
fanagement:.45, LrerIIt€ rrorft &
FJ! t+srnes* fsi:r: are m+tivat+il an:i easiu$itt=ed t* g,r*&rce pi+fit-s. Psofits are rlf€
oi'iiie iarrg,ri,ie -var-dstic.i:-* tc itteas-tu-e iire perti-rrrrla-rtce of ttre iirrrr aiui iire n_-riiitagcm
cmrcer?led. It aiso signifies the heaith of tire firm. Frofrle sre influenced hy varioue iactcrs
*r-r.qh a* c+si af p'r+duetfuq ie1€nrlcs and *tlr*r fartcrrs. b*th internal and e:iternal ta &e
f,.-... n.--44.. -.-- !----J:- -,- - l: :
rilrll. fl'(,fitti 4I€.ttiilu au pl-E{trud.
26. Define Pricing Decisians
A titm's irctitahitiry atd *ucccss gr,:al!y dcpcrrd on thc pricing docisians snd thc
pr-rc,ifig p'oiicies ot'fu're iirm. Ttre paiioiiizatioii oi-the iirrrr's produc,ts t'v tire c,iistoi-riers, fu're
cr'?npetitiotl isced ll3r the pro<iuct aiong with the profits nf th* firm, Iargeiy depeniin on
the price cf &e prs+if{- Pric-ing also depends +n tire e.Eviro*ment i-ri sr'hic.h *ie firm
op€r'tstes" Eorlipeiiti{ill$. {i-risioriiEft ei(;.
27. Elefine Froduction fulanagement:
&hea a {na$ager orga*izes mil pla*r the firm's pro*"rctienfimcticrrrs i.e. when he
tries io c;orr?-€rt the raw maieriais to ltnistred profrlcd tre iaces a mimtrer of econoniic
probiems. The eiu<iy oi'irro<iuction fimctinn' descrihes the ir4xrt outlnt reiatinnship-
Z8.Eleft *e Ca*t nnaiysisl
Ct-rril- analy*lc is dcfincd as {vnoc wa}r tc cara highcr profit,c in hy cnnt."nlling thc
coui irr-wiwd in producirrg ihe prodiici. Study cri c.ort is rrecersary fbr mahirrg eiiic.ierri
and effeciive menagerisi decisions. If a detaileci cost anafuieis and estimation is done, ti:e
fi-r!* +arr rr1c*€ upcn esec.ti=;e prcfit n:.sflagearcrlt aad eouIrd pri+ing p.rs+ti**.
29,=rt'liai are €iie ilieeru economic Coixiitions:
Tire macro eccnomic co*diticns afe es foilows
(ai The etr!?lorfi-v in w-hich firms crperdie is predominantiy a iree enierpise
Ff'ftfirat"-.1;
- - *-- ----J '
ibi Tite pltxtEtlt day er;uriorny is rurdergoing rapid icoiuroiogicri ard
economic changes *nd,
{e.} Th.* gcr.=,e.rrisrent :rrte-*;e:::rg ia *.he eErr*,:sric affabs has hc.re*ge{ irr
tii€ r'eceiii iinies ari{i is likeiy to go op ftx*rher.
38. lYhat are the Ccmmon poinrs in h,ianageriai Ecoromics ?
I -l'danagcriat cc,*notice dcals with ttrc dccision makirg hy fltanagcrs, cr-ccutivcs
arrei engirrer,ru oi eccriior-riic. r-raitre-
(,)
'a-)
,}
.ft.*J

; r)
(.
2. h,f an*ger"i ai eeon+mics is gcai eiti ente{i.
j fr^-^-o-:-i r;^^* ^--:^^ i^ i..-r!. c.^.rier,i-i;;i :tt..i tmefr|r-:l.:.-ti=ii4ll.1u=lt4! j-r+:lllr_fll!!,-- i l: t_!r_!!.!1 !r_lsi=='i-!'!t:f ! G:l:-i :iii:-.!!r----.
.i.ir.iarragr- iai e,;+iiurttics is pi'aggiiatic..
UNIT - Ti
ti E rvl+irE Ai.iii SC i{EELiL E
f.iiefine ilemaiia.
Ilanmti ici eiefire<i a"q it indicates ihe quantiiies of prociuci.e (gooeis serr,icei wirich
*ir is*:t i"q i-r. ilIirrg +:tJ f!.:-ierr+iai!y' a-f'!e t+ pur+liase et *"'&si+-::s- piicss, i:+!'dl:g +&er faif+:s
rY:ii,slafft.
2. what are tfue aype* of llemand?
*emaiid &a aai; ++msn+diq; is detemrbed b; ii.s eatne" Demacrd ftt sr=reh
csffi-rioriiiiex wirieh aie esse.r:iiiai ibrr iirs consun-rcr i* unaiib+ied sigrriiicarrii.y b-v ciianges
in their market conciiiions.
-trl,e
can ciassifu the llemand into fcriiow-ing ffies.
> r-tem=nrl f,'rr i;-.acr:*te;'tc ertd rr-r"rr.dtr.er'q .tir!"!rls.- ir'+iiii+iaa+ !:-:i E:-;itf:_:.ii tj:i-.zF+r-r
i Sh,Jri ie-rr& anti itrne term derfftttd.
3. Beftne Benrand far Consumer's and pnrelueerls goods.
The cn*sumcr's gaads arc grxrds uscd fiar finat consumption- Ilcmand finr
crirrsume.r's geods are aiso te.rnred as direct dernand, arrii iheec goods are rised direcil-g fbr
finai consumptions.
Ex*:ep!e - Fe+d it**te, ree$made dtes*es, hosre-ee, e.t+.-,
TIre protiurcr"$ g(xrds are -{$ed fur piadurtion oi otlla' gtrorls, Deti*iid fbr
gnoducer's goodc is termed a,e derived demand ftr theee goode fiE demsn{ied not for
fiaat c*n-nrmptia* bu-t f+r the gradtrcticur +f,adrer geocl*..
Exirnipie - Macirirtes. Tooiso Eaw- ivl:aistiais. eu...
4. fiefine Determinants of Fem*nd:
An indittduai's dernand irn a cotnmodrty dependc on his de*ire ard c*p,rl*iity tn
peri,lmse it- Ap*t *arrr the desire to pr:r.&a-*e, dre.fe are Fi*!!y othe-r faEt*re '-.,.'hi.il!
itfiuener Er ptu'uhase of a pruiuot (rianarai). Titese ar-r: i{Tr€rwrr a* deinmd tleienrdnauts.
5. What is meant by T'astes and preierenses of Consunrers?
Tt;e r;h;ri,.ge of iastes a.ad prcf,er.=.a*es of e*eisurners in fa':or ,rf a en'a'i::*oili{" riiil
re-ruii in a greater deinarui tbr ihe comnrodilv. The opposite aiso hoids good ie. if ihe
ta.qtes anri preferences of consuner changp against the ccmmodrfy, ihe demxfiti rn'iil
qrrfFff
6. What are the iwo kinds oiConsumeru expeciatians?
Crf,lEr-r.til€rs have tt".+ kind of expectaticias oae pe.itaias t+ their fi-rtr.ir+ he+me ar.d
ihe seconri is reiated io tire fuiure pric.ee of the goods and its relair.ri gooiis.
7. fiefine rrdvertising
{t

r_
,c.{ivertisemener prrovitie inforrneiian a-irout the p'es*nce of quaii$' proriucrs in tire
rirart-e*;;ct{;ndriees s,.rst*cner's ti-^, hr+* ril,ui€= it ai*: frcsi-!';lts: thc iat*stpi+f*r*r'.':es +f t&'t
gtnriiii puiiii* to itiasses.
8. Ileiine tfue Law of fiemarr+i
The l^eu. of Fiernmii sratesihat "The arnount demende{i of a cnmmodity increases
F;-fr*B {re.rs !s a *ll iil pric*, ar-rd flre *rrl*iirrt 4esi*a.Jed cf e c.::-*srcdl*' di.ailrlighes *t *s
tinie of risc in pric*' . Tirat is ii iire pri*e of tire gooti itir:iear*eu itr quantiry tleti'laffi6{i
decrea*e*, r*-hiie iithe price of the good decrea*es iifi quantitv dernanded increaqes-
The r-a{eti.:a *f priee t: quaatif; riemaailed I sa.le* is !'-:r+wtr as &e i*e'af 'ieillelld.
Law of degaiid siat6ri tirat tlre irigirer iir* price i* ihe lcrwrr iire tiernafld is anti vise vor*a
hoiciing other facicns as consiani-
9. Expiain the assumptions in Lawof Demand'
The la*.'*f dem**'l i-e h*sed an Eertain assirmFti'i-Tu:
F tsrise* of othor goorts shoulel not change.
F T'h* dc.mand fi:r thc cnnrmnditS, shautd h* c*ntinunus.
tseupic rihuglii nui oxccpi ;my ohirnge in the prfu;e u{'a u*nmr-xliiy
10. Define the price qumtity relation.
The priie qua"tlty retation is itefirred and can be expre**ed as demaa{ being a
fiirrctbi-r ot'Price
I;=r(pi
11. Wh*t Highlightr of the law of demand?
Thc higtrlights af thc law af dcmacld arc aq fnltaws
i. Ttre relatioratrip bstn-ecrr pice ar-rd quarriit! dema*d€ii is invere€-
Z. -ftice is the indegrendent variahle and dernand tire defrenriant vsria-t le.
-?. I*r.,+ cf demand assuanes th.at except fcr priee and deurand, c&er
fau'lm* r6fi1aill eonstant.
i2. What is Demard Shif* iChange ln demand;?
Faet+rs ehift th.e deqriaart f,+r * parti+*lar pr+dtr*t eitbes on the rig!.t *ide of
ihe dern-rand cir-vs or to ifre iett eide oiihe den-iand cliive base.ri on ttrc char-rger fti pricr-
These factnq other than dre price of a good that infiueftce riemsnd se known e.e {ismand
gh:fter-o,. The ""&iff
irr tlre dematir{ eithe to the left ar right i* called the <lemand shift'
13. What are the Exceptions to law of eiemand?
The e+:eepti'ers trr law *f elemand are as &11sw''s
i. in share rrrarkeie on wouki have noiiceii thai ttre rieE P pt'i.* oi ihe
shares increaeee, the saies of the shares whiie decrease ir the pnce of
the s.hares resutts ia <ieerease of saie +f {-ie shares.
2. Sume g{rffig wiricir aet as $tatue t-vnrboi affi have a $roi} appeai iali
under rhis caiegnry- Here nhett the pice oi the product rtses ihen the
:' :
t*. a..J
'.-,J

af4)esi oi the prociuct aiso dses snci thus the ciem.tnd. Some exampie
are iliamatds anil aaliqlles.
3. Finaiiy, ignoruriee oii iirr part oi ilio Eqrnsuriirr niay ca-rrrle iiie
conslnmer to irur at a higher p'ice- es.neciaiiv when the rtse in pice is
+at-e11 t+ !*ea11 .3Ii .h'1E--'r+V*:11ent U1 Ai-ielit-' o-'-l ' r='-I::'^'finr' ift
=fi+e
,:Si+5.:-.::i.*rl..a.*._i-:.ij:.J?!.::::':::g:aL'-:::-i
I r- --'- - ---Ll - -- '-.- -.---1:.'
oEtrTtloi'atn it fil quauty.
i,i. fiefine Individuai demand
In<iividuai deman{i is riefmed as "iire quantiry of a product demanded hy an
inriir,"r,lrre! iiurchacei' at e ohtea nrice is l:n+r,tr as hdit:diiei iia*iaa'j."na---ie F ia+.--in
i5. f,reiine h{arket tiemanci
L{arlcet derm/rd is <iefrned as *the ioiri qu.miiiy dernanded hy all lfte purchaeers
t-agrther is kaowa as t&e mar$:rt demand."
i6. *'hat &re tfue types of Elemand rttnction?
Tte nnres nf rlemarrl fimcti.-n arE as fbl!+g,'s
a 4----------!:-- C----!:^
i- L.OrtSUniPIiOnruflGItOfi
Z. Fro<i:rct constmtption ftmcti*n
3= DiffereErees itr regr+nal ie++me*
4. I*corne €xryi.fiiott arxi duiuiiti
i7. What *re the Characteristic.s of dem*nd funetion ?
The chafacteristics of dgnsxl fixlction arc &s foilorrs
1. The krng nm reiatinnship tretvreen cnnsuflrptiofl afid income i.q sorne
what stahle, arrd expe,nilitrus on eoirsr-xeFtiolt is ir*rally about 85 t{r
90?6 of tlrr itr{fns.
2- The cnnrumpinn functinn is highiy rmstahie in sixxt nms and the
relatioaship betrrye.es incorrre end cansr:mptios c:tutlst be pre.dicted by
aily mafiffinaiicai icxnuia.
:1. Ihning the fleriods of economic frrnsperi*, there is an ahcoiut€
incre*se in *re expeiiditure *n cc*:eumpti+:r, but deerease as a
pelr]fftagp of income &ring pedods *f depessiaq tlre cutwtxnptiofl
deciines absoiutely tnrt tlre expenditnre on the cnnsur*pticm increa.{sc
*s a p+rc€ntage ofinconre.
4. in flre pfii&ls of economic l'Eeovery tite mte oi ittcrease irt
crmsumpti*n is higher than the rde oi the decline in consurnpticvn in
times ofrecessi*n-
i8. Befine Fnoduct csrsrrmption function
P{sduction fimcti+s eea tre de.fined as t}re rel*ti*nrhip between tlie t+tal
ir:corrre of the c;onsrlm€r arrd salEs of particuiar products. It nreans ttut w-hen there is a
change in incorne there is a change in the demand fnr psrticul*r gnoducte.
i9. fiefrne lrcame eEpecittion$ and lxmand
Expcctations arc rctatcd to pcoplc's cstimatcs of thc lc'r,tl and durabitity of
the fuiure cccrrroroic condiiions. The demand tbr many c.orrgrrrfior durables {househofti
appiiences iike Tr, lVa*ing machinq etci ie of,ten s€nsitive to generai expeciatirm*
roc -:rrl ir, r in,^nsr e lpxralr !.a* -*-ra s.L, --.:trE
)
., 1

Ztt' iYtt:;-:ff fea'rures or.aciverrising ciem*nei reiarie*sirip ?
, T_r;,i*,;Jiffij:r, if_j:ff#1ffi;,#ff.,e wiii L,e a *iiaiiiamoufii oi saies pcssinie f"r ;;;;cuir product bv viriue of irs
2
ff*i#'ffi*l1Y'I1iu;';"",, aciveiiisi*g and saies rii,u
3
#;f#1;;,-.*,*;,- :;
.-";ff:
:;:ffiach,erii*enrent*il!&**ty
tc e point orto- tirr*-*_o-iflcre&se itriar''* +r:Iy IEss than prap*rti,:nate e#et *a seles.
2i. fiefrne Eiasticit-v of Eremand:
F.[*-"rieiry af .iern*ru[ l* **e"*+
j.j__]l:p::entegs
th+nge in +rantq, demended
;li11.l#;LT.';:T.:,fln'#3; derrrar-rd deteinriianr urrder cons-rratiori wiiiie
The irrmula irn imriine,i,. Fiiii;"
'
Fn=
. F'erce.etege c.&arrge &i r&* qr-i*ririq. der:iasded *fgoodX
Percenrage ch*nge in determinant Z
22.'Define demand determfu snt
or*r,*nlffHifffi:ffim$nf desree orchange in de,nari{i ro rhe desree
23. Whlt are thl Various El*sticity?
Tlrc lariaus c.lasf
l Frice;H:;T:rT"m;=
Z- I*came elaeticity of demand
3- Cras_q elaeticity of A***A
4. pr.cxirotic*al
"i*ti*it"
---
S. F,,itxlrfsfions elasticif,, of, denranci
?4. Define Hce Etasticity af Dernand
Pncc clasticity of dcrnand can hc dcfincd a_q
efhc rtn.'*^ *€-^^,of quaaiify den-raaded t" r *ffi" *';o*- -q
*fhc dcgrcc *f rcspo.n-rivc.*css
25. khat are the T-rpes aiprice ei*stieitv
Thc tyg-rcs
{ p**"
"ri-rr",r1. J.T_?u,r**
i. pr.rtecti-y
eiaeiic eieirrarid
- ..-
i:
Aheor*tery inerastic demand or perfectry inerantic dernand
4 JffijH$-J,X,THfiffi
- rry'ruvrrr
S. Itel*tiveiy inelcstic demend26" f,lefin* Abs+lrrteg_io-fo-ti* J***JO.o, purfuCI,* iuslest.i* rtem*nd {ef}:Atxoiurriy ineiartic ar.r,"rni'i* -i+r."t ; ; ;;g" in.prirrc rrowsoever iarg",
:rfi-T#::r- * tire quantitv a.**a.ari; ffi#tur*, rhe shq,e .,iir,* demsnd
(_,.1

toi
2?. fiefine Rei*tireiy el*stic demanti iep>i;:
Reiatrvelli elastie rl*ma:r.J is il*fiaeit ec e r*d+qti.:i: ia prim leads to m+re thari
proporiiorute change in iiemaad- Here iire sirape of ihe dem*nri curves in iiat-
?S.-1shat are the Factolt determining price etasticiiy oi Bemard ?
Tlre eiastieits, +f dema:ld ilepends +n the &ll*vr'foig faet*r* ::am*[y
i. i.iature oi'tire Prc*iuci
Z" F,xtent of tr.sage
3. A.';aila1-ri!ii}, af sirbstiti{es
4. hiounre ievei oiPeoPle
5. Prnpnrtirm of tire incame s,rent of the prrxiuct
€J. Lkg*rrcy ef demarid alrd
7. Dtaability of a Product.
29. ilive short note o* Derise{i end Autonomous Demard.
lVhen the demand irr a product is tied to the purchate of srme pfi'ent
prodir*t, its rf*rnancl is *alle<I*s D+rhrd'
For Exampie
nemand inr ccrncnt is a dcrived demffid nince it in needed for itq owil eake hut ior
sariciying the demmci frn buiidings.
An autancrrnorm qiernand for a camm+diry i* .:*e that asi*es +a its +r".'sl **t *f a
naturai desire to E(rn$fiite ur p{riisc$srrs a conutirxiity. Autunc;ntou* rlemand is
independent cf the denrsnd ferr efly otirer csmmodity-
F+r Exampl*
Tirariemraud for crrmnroditie which aite* tlir"ectly fi'om tite biotogi+ai *rr phy$ical
neede of hurnan treinge iike fcrod dres.tal shelter, etc--,
30. Ilefrne Dement! -ethed tt!*.
De*rand Sotredril6 i* a tist of quantitke of a catu*otlity prelneed
cotrsutn€f d different prices. The Iarr of lXrnand mry be explained wifi the
Demsnd Schedulc.
tile
lVhe6 the price fails irom Rs tti ta Rs 8, quentity demanded increa.ees frcm I to ? in the
-qa$1e Fiay as price fatrtrs, quantiti' Cenranded increases-
st. What is Demand Forecasting? What are its Epes?
A fmccaqt is a gncdictior! or cstimati*n af futurc sitrratian. Siacc flrc firfurc is
uncertairi no ibrecaeis can'r,e 10CI% accurate and currertt daia- Here tre ibreraxt has been
made aflout the demffiri canditicme ior tire particuiar ccmmodity-
32. What are the ?YPes of Forec*st?
The Spe.: cf f.-xec*st are al fcrllcws
by fim
help of
ing tatrle sh(rw-* tlre dffnafld sciraiuiq of ceimmrrdiFy X
Prir",-,f ,Y S*) ! quautity Dsffim{-ler!
t
,}
4
q
tlt
lv
{l
o
t
4
t
i_)

c Paqsi',,e F*tecast
r .u niir,-e x"-'nreno cl
. LonE term Forecast
* (i!rr.*.t l*rsrr f,-,i';.r'rg*_ uil!'t ! t.b'Ilir aurs_r*Da
l Fassi',€ Forecaet- It preriict tire futtre sifuation in the absence of any actifir by tire flrm.
2- Acti'"e F*r'ccast- It astimatc f*c firturc situatinn tating intc aacr-:unf ti:c likcly futurc
ffciions of tire firm
:i"Sirnri. ternr irirecaet - iisu.tliy ma{i€ for a period upto one ye*r . It made in crder to
!ipar=; tite e.fcci rlrf r^:rrrer.ii nciicies nf &e frir-rr _[.&"je for *re eg-ratr,liE_hed prc.i*cts Of th6
firtn
4" irmg term Forecaqt- Relates to the pro&retirm frn'a year or ?nor€ " It is u.qualfu msde
sheii a it€E Frrlili?ct has ta be l*isiched
33. lftirat are the ciepd invoiveti in ecientific apprCIach to Forecasting?
Ttie fttlee;iag *t-"-p* q'3a:titrte a se.ientific approaihto Demaud fmecastiag.
r fticflti& affi statr the objcciivcs uf firecasring clearly.
e Select epprcpriet+:ite.thed of fcrec.asting in &e right +f objectives.
r ldent8 tire variables alfecting demard for &e given protiuct or service.
e Exlx'ags {l;se.;ariablec itl rpprq:rtate frNm
c tniiect ifte relarant deta tc represent the variahles
a Deisrtdte flrt; rn<rst pr.rbable relatio*ship b+tneelr ^dr* deper#enf aad ia.Jepe*dent
variabler.
r h{ake qrprogrride assrrnptions to fnrecaets afid interpret
34. Erplaisr tlre crit*ria fcr the ch+ice of gc*d ferecestirig sre€hed.
TIE ftrilowing sriiffia travc [o bc foi&rwed while chursing the fors,oasting mcrhul.
Ttrert, are
. The rusult aohieIabie iry a fuitr;asting reetlrod nnesi be weiglrted agpirut ilre rrcrt
crf the method
. The u.ee to which the fcreraet can he made should he weli understrrxi. infac! ii is
sot a. {F$stiafi r:f,resilts ac.hic.sable [r*t resgits achievec! try f*reca-sting meth+d.
t It is quite easy ro jwige the existing trend. But for a goori forecast it is neccssary
&aJ it ghoutd al** pre.{ict deviaticns anri tlrrning paints -qc, that the forecasts are
rnore eftic.tivs.
. There is a time gqr between the occurrence of a* errcnt and it frrecaet- known ag
she lead time.
UIiIT-III
T}RCAFI-TZATION
1. !1'hat is Frlce Deternilnatl,on?
. A finn cannot artritrariiy fix the pice oi itr prociucts to achieve it* ohjectiw of
maxirnizmg pr+fit. There *etr be *rib' *ae optimai price f*r a prot*ct that can
nuxirnize iire prrrfil uridera givefl set of oonditio*rs.
r The price is gateraliy different in eiifferer* kindc of merkeig riepending rm the
ier.e! ef competiticrs bets,.ree.sr tlre sellers.
* The seilers should not chaf,ge tlre price for their prruducts as they like.
2. lYhat are the determinants of Prictng?

';
The ioilowins fiE the factors that determi*e the Jxice cf a cosnmoditv:
- -F!ro ,Lnt..tt|.
a (losi cf Frrxiuction
a ili:jectivss oiitc flr${furcers
- i i4rqv L-r Btu Lu'ila|jl'utrutr
i t-inverrrment pciicy
3" Erplain the meaning oiProductior.
Pra*Icti.f,sr is an ecti.ri4,- that trarrsfarms hprrts lfli+ *isF+t. Frod'++tian is. an1,'
aeiivii-y tiiat increas€s coneitmer usailiiiiy of gaods and seivic€s ihus produciion cofisists
of p*ducing, stodng and distrihuting Lmgihle of gnocis snd serviceg
T?orerannttle: A- sirataf mi!! rrce< <rr.^.h ior,rr*c e< leF-^,rrr rzrx,'metcriel lif,'e qrrnzr.znp
and capiiai irrveste.d it ruauhirier;v-. faotcrry builtting io pratlucc $rgar'.
4. Expiain sfuo$ run an{i iong run production
Shnrt run prnduction
Ths shsri rurr is ihai period of tirne in whictr sonre sf the tirm's inpufs are iuied -
these fixed ir{rute act ss a limiting fcci$trn chmge in or*pul In the ghcyrt nm at ieact one
of the irputs remsi&s csllstant , rthi!+ tlre ather iepet-r are rra+; ii: lletur:. Simply; if *e
firtrt uses ftIorE iiun two itrpofu btti ottiy iwa of tireni aib varieilie arti oiipr i* flxeti is said
ta ire sheni run
to*g run
The lnnc n'.! te!'!tt i* that nericrl- +f tine h *:hish therc are nn limitino'factors aniiaiis i+t i. ii:i IEiEiaii; .
outprfi ctraiigc. In iorrg run all tlre -variables are variabie in nature and there is no iixed
irput iike ahn* nm . Simpiy, if the frrm uees crl-v two inputr anri hoth of them variatrle in
crtrrra io aeirl fn lra tnnc rrn
5. Fefine Production function with its trKumptlons.
The pmductior: fiurctiorr i: purety a teehri+!+gica! relati+aship. which exErresses tlre
rsiaiion irciween outpui of a good produc.cd and the riifi-ere&t co,nrbinatione oiinpuie used
in itc f!fio&rctinn. Ii mems the maximum Amcnmt of exrtprs that can be frff*rced with dre
hrtlp af eaeh pcssible *emtri:rati+a *f inputs. The pr*ducti*e fuls.tior oar be
ElatllerHatieaty writtou ar
Q= F(I*N,K.....i
A aerrrmr,iinrc '
L. ie.c,ilnoiogy is invariani
2" Productim frrnctirm includes ail the tech*icallv efficientmeth*&c of gnoductinn
6. Define lawof varlahle propositions .
Thc law af variabtc prapositinns statc-< that as marc and mnrc n:f rrnc factor input
is erupleyed , all oiher input quar*ities held constant , a point rrill eventuailv be reached
rrhere additional guantitiee of the varykrg input will yield diminishing mrginal
c-+ntributicsts to t+ta! produc.t This !e"*' is als.r celled as laE. of diminirhing marginal
ItrTUrIIS
7. fiefine Isoquant with its tvpes
An Isoqriant is a *urve repre*enting &e v.ario*s E+mbinatiari cf f.e'+ inpiit-s that
pr-oduct fl:re sanie animint of output - An Iroquaiii is detined as firnis w-hich *trows the
<iiffereflt ccrmtrinatirms of the two inputr producing e given ier,ei oioutput.
I

T_r,pee:
i r '!-^* .Tc.ntl.-r*r.:f! - I jlt!._,4! _-._. -l__-._
Z- iaput- oi:t-F-{it isoq*ani
:;. Kini<ed leoquant
4- Ss!is.st*. cctl:rr.:. trecquent
8. What de yau mean by Return to .Scaie ?
Thc. Fcrc.cntagp increasc in r:rrtput qrhca a!! inputs vary in fitc samc prtrp*rti*n is
taoran as reiEins to scaie- obviousir rsturft to scaic relate to greater u6s ot-inpritrmaintainingthe sarne ieclmigue of producti*n
l-Ersite c+tb- D*uglas pr+ducti+n functie:-i u,id its properties.
Tirc prtxia*iion ftttctiort suggested.by c.'tr.coili): wfo-crr*e fciiowing farm :
triT-iere a - Totar orirpurQ-lJi'k'e-
I. : IIni* of iah*ur
K =Ijaitc oiCqritai
3..: e *cflstffit
B = aparamrE+r
9. l*hat *.re tfue two fa*om in pricing strategies?
The foltowing are *re factrs iri pricingitategies
1) External iactore
2) Internal factnrs
lfi. lYhat are ihe externrr factonv in pricing strategtes?
T'hc cx'tcrnar factorc ia pricing etratcgics *"* *i faltows
r Ilre ctmpetition in the markel
r Tle elastlcity of supply arid derus&d
r Trends of tlre matet
r prrcharing;xlwsr of huyere.
r govuilrrnm( potricios lorvmeie priuon.
Il. Wh*t *re the twa f*ctor,:s tn priclng str*tegt€r?
Tftc factnr:s k prlcing str.atcgics arr a.q fofiow*
li The cost*
2i lU{anage*rent policy trmarde the gross rrargin ard the sai€s firrftcrrer
12. ilh$ are the determinants?
The rieterminantr sre as ioliows
e olrjectives of husinecs
. cumpctii.icn
r pro<iuct and peimoticmai rtrategiee
c Ne#uro ofpricc snxrsitivity
. infiuence of middie men
r Reutilizstion ofpicing
G ri*.,rcrnmEnl rcg*!*[i+n
13. What are obJectivee of business?
.)

(
The fimdamerixi oiiiective of a firrn is io srm'ive in the husinese snd then tirri','e.
Th.e pr:rehg strateg, a.lc'i:te.i h-:-, a fi:'ci:r is -,ery n';-ieh.= t'ii ttiese faqi':,rs.
i4. Wh*t is competiticm in pricing stretegy?
T* c*me *rit eitli a pdeicg pclie,v llrat wi[! hc ad';aetages ia th.e fii:ri:'. E?ailagfr*
reqrrire a pe.rieci ur-de.rsianding c;f tire conrpe.titive r&t-i!-oruBe.fti in w.iricir ihe tum is
piaceci.
i5. What are product end promotional straiqies?
Thc prr-rduct attd 3:rcmatiana! stratcgics arE aq ftrtlaw*
:
---l--^!:L--l!l- l,rtxruut ll.stirr
ii. frncing
in. proerotiaa a+tiiti*s
i1,-. riisiribufion of prcxiuois tiu'ougir iire clrannel io fite Eoftslutttsr.
iti. Wirat is nature of price sensitivity?
&. e ksr+e that mary fs.s{rar.$ *csltrih*te ta the berease +f price *er.siti=ri4.', },ut
rri&itif;€rs should not ignore itre factors that minimize price seasiiivily .*'hen ciesigiiing
pncing strategies.
17. w*hat is infiuence of micieiiemen?
Middiemen are the nnes who stock the fmished prtduct of the manufachrrer tn seii it t$
the cgsiasere. Thes-e ase sleo caltred the channel ftr dierib$tioli.
18. What is reutiniz*tion of price?
This s.tratcry af pricing rclics an thc tricd and trustcd p:'r*iag stratcgics rx'lrich thc
crgarrizaiion has fbllomred *Ii aiong. This picirrg prac,iice is otten rouiinize.d ttui the
extend vartes frcm cnmpany ta cnmpany srid frrm pro&rct to gnoduct.
19. Bh*i ie the goverllmeftt regulation in pricittrg?
Ia erder ta **fegria.rd ttre interests of ttre F$tltic the government acts sn their
be,tult to prewrri lhe abuee of the rrronoplietic frowcr and colitxion anrong bueiness.
2tl. S*y some of the objectives of the prieirg policy?
Ohjectil'es +f pricing pa-tic.ies art as f*11*v.s
L prolii n:raximization.
ii. inngterm welfsre of the frnn.
iii. facingec'ntgretilictr"
iv. flexibiliry to economic changas.
v. satisfuing rate of rchrrns.
21. What are the cost oriented prlcing method?
The cost oriented g,ric.ingmetlr+d are ae folklp.s
i. cost piue pricirrg or fuii cost pricing.
ii. Marginal co*t pricing cn incremertal or direct coat gnicing.
iii. Targt*t prieing cr rate g,ricing.
iY. pr"ografiunedpttcittg.
22. What are th* competition orlentie{i pricing methoqi?

:!
Tire cnmpetiiion mienteci Enici*g methrxis are &s iaiiorvs
i gnitrs r:ie r-,riritr::
ii. Loris reader ilr-itirtt.
;;; i-'rrsfmm.'-.i-i.a
1,.'errr5.
v. Tratie a+s{r,ciati6rl pricing.
vi. {.yciicai frncing.
1,ii. Li'otar:rr-renticinrt-
--:1:
vtii. I rltliovtrt pflcEtg.
23. 14'hat are the praisirg b*sed methods?
'rL^ g^lt^*,:^-
^-^ +t.^ --^:^:-- L^^^J *^{{-^.1- f^lt^-^! l!L'!1.'ttt!H'lalv ilta l!!!
l!!4!ll!!g
lBW !la'rllli.'r*: dL'4* t1.'!!'-.'Hl
r- &ominate{e,i} F&crng-
ii. Iluai pricing.
::: n--:* ^ l:-.-:--l- -!^- ^- 3:OC^----i-l ---t^t- -!!r. r!!.-:5: .Jg$(-:!!!rr(rliialL{I u! tiglE:ic.i!!t4! }!irug€.
24. w'kat rre c.sst Grierted pricing methods?
Thc cmt cricatcd nncins'mcthad.s alr as fi*lnws------ r-- --'-'E "'--.'-'-
i
---a -l---t, u{-r.t lrlu$..-..
ru margmal cost f,fic|ng.
;;;i t.r{rPl ttir-inrtati.t
25. ffihat is going r*te pricing meihod?
In soin<r ratc aric.ins drc cmnhasis is cm thc markct sitr:ation rmlikc thc fult ca*t--' Et-'-"c, ---- l'-'--"E -'- -""I-'--
-.i..:--. -
_t--- 4- ---L--:- ----pncmg svIgrE mG EmpEEE$ Waf Oil Cti8t$.
26. l*hat is ie*derchip pricing method?
Thc rvncins slratcsa'is w.idcfu rrecd in rctailins husincss- Bccausc thc namcs havc- -'- r-'--"'tf "-'---pJ '-' "'-*'j
-'-*!L..
----J
t--- :- :3 3t-:-
--t:--- -----
L
- ---c---a ---:rL 4L-
-i-:-- --L:-r- -----!3-
:- !-----
UIE WUIU lulrts ll.I rt UUE pUllU-Y ltla_Y trtr t/tlltUUE{-l WlUt tllE pffUllrg WrltUII ltrliUltlr lll IUS-xfAi-
This is known as ieaderthrp pncing methodc.
?7" *'hat is custannar-v pricing method?
ln czce nf <i'.tne rtgyv{rrr.*< their rtric.rrs ce* tnrue n:' lec< I hi< ..lne< nr-* henr.ert rfire
z- l--t:L---!-
--L:--- --
4L-
--r-l---..- --r
L--a :L L------
--
gL-
-----aL- -!'LL- ---J---!ru uEfir.r$liltc aGlruil ulr uts scllsl $ lxtlr uur rt trilplr(;{Ls a$ urE rtr!$tt$ ur urg lrtiJtruL.t
gnevailing in dre market irn a krng pedrld oitime. Tiris is knnwn s.c customary frrcing
-^+L^l
28. What is price leadership method?
T<r rtri inr{rrcft"r.' rrrrt nf eil +he fitrnc ntrerrtitrrr ifirlrrqfn: e*te;st ntta fitm will hrve* !r_rL. r.
^7
!
iis co*t of production lower tturr all oiher tirrru. Thris is knoprr aB Frice leadei'strip
metircxi.
29. What is trade associetion pricing method?
Thc kind af priclng ariscs nut nf an ufisaid undcrstanding agrcc.*tcnt hctp'ccn thc
!a----
--- ---!:- -
:-- rL - --- --!- -.IItttL U}}E!4ur!B ur urE rl&ulttrr-
3S. Wh*t is the cyciing pricing method?
,

,.)
The p.icing methcd rrririch is done to capit*.iir-e cm the cyciee nf the seaqcn in
aaE:re a,:iii i.he E-],'*G h the e*':iri*iiiy are k:::tcst'' a* e1"e1!'*a1pri*h'g-
si. R'irat is imitative pri*ing methsd?
Lrnitat&e priciag o'*t{ad i* v€*,' sixdlac t* the !'rs* 1*ader prieiag meth*d' Thi*
pricirrg 1rciicY i* aitert ureii in reiail bnsirtess-
3i. 14trat is iurnsver pricing meihd?
Trxe*!..es ls *.ha *osJwhi*h desmte* the *+lq* *f the g,radtt+t= Ttre trig$et th*
igrnover fri6iiiB irigher thf sa|gs- This is itIrCWIl at ilirI-ro-!'er pricir:rg il.rBitrod"
33. What is dusl Pricing method?
IIs*all,v thc hrms ix".1, producc ce.qcntial cotnm*ditic* ha!'c patt <-rf thcit produc't
riniier arir*i*isirati*g pricirrg o.e pr.t of lhe prodrict is soiid in tu'te tiee inarket' This is
i..*own aq dual gnieingmethrxi'
s4" What ie Price?
Iticc is thc sourcc. af rcvcruc for thc firn attd !t dccides th* ltcaltft of thc firm'tftc
custor&sr ac8€Ftsne,€ or rejection of a produc,i is niosi of ihe iiine pre.rloaiinaailv
infiuence<i ry ffice-
35. -*hat are tfte eii*rnai fastons infiuencing ihe prdcising riecisiott?
The faetcrs iaftiea+ieg ar€ a1 fsllass
i. Ttre conrpetiiion inthe marlc-e'i'
ii. Tire eiasticity-cf strypty and dernanri'
iii" Treilrls *ftbe mat*et'
iv-. Fure}a*ingpclwel'ofbtryr,rs'
v. (-iorrcrfimerit lxliicies tonlards lrtces'
UFiTT-IY
FTNANCING
1. w*iiai ir ixl*iir+rl rhect?
The irsisnc€d sheet prcrvides ihe frnancial pn*ition of a corrp*ny st slly gffen
p*irit cf thre.
2. Say sCIme of the important finaneisi st*temonts?
somc of t}* itnp&*atrt f;na:rcial statcmcnts afc aq fallnws
i. Proiii anti iors account'
ii. -tralance
sircet
iii. limdfiarv stetefflent-
3. What are ihe contents of a b*lanse sheet?
T'*e halance eheet inciudec tite follrming contents
i csqefc:. i+uvlE
ii. Liairilities.
4. Say ssme of the tYPes cf assets?
Thc fi-ollawiflg are ft* $pcs nf asscts
i. Fixe.d ass€ts-
ii. Inwstments.
.

iii" i;urrent acsets.
iv. Inans and arivances.
1r. misceilerteorlt expenditure
5. !Yh*d is fir*il *ss*.ts?
Tit€ir iife liedoci iri veiy longr iircrc arE pt$"citr*at ftrr +rafly*tg ant iire operatiua ftr
a cff?}penY. {Ising thie co?fip.any can geners.tiflg rerefir}e. This is known ae fix# a-cselc.
6. l*hat is insestment?
T'he iong terffi ffnd short term financial secudties owned iry a comperiy ct)mes
---l-unri€r t.hi-t *ateg+ry. Ilere loag t+rat fov*sf.mertts &iee?rs buylng shares *f *re +ther
$offiFafties.
7i Wirtt are currert a*sets?
A-ny a**ct that can bc com'sf-cd mtn caslr wittin firc- )rcar r-tf tirne i+ callcd as
currertt asf;€t- Ttrff inr-ouid ba converied inio cash at lhe end of fte operating cycic of a
ftrm,
e) l{hat ere the items come under tiris current a*sets?
,!,...
T&e followiag ere tbe assets thet ccrme rmd..er crlrreat assets
!i-,r i caslt.
ii. dehtom.
iii" invertrrier.
9i tlrhat is ioans and advances?
L+an is the anrount that a ccmpilry loms ta its etrployecq advan+es gi..,e* ta
aupplies, gov€irllrr€rrt cni-rh'actors arrd other agencier it ia also inctude prepaid cxpclses.
t0i What are t&e types of ti*bitifies?
The follavriag are type* of hatrilities
i rhare capiial.
ii. fleereves rnd surpl&ses.
iii. recurcd loans.
iv. unsecru'od lqatu"
v- current liahilitiec.
ii) Whaf is meant hy share crpitai?
Shse cqitat isrehrriles b+th eErS, share c*pit*l and pref,ece,ace share *apital"
Equtty share hcrldere are the owner8 oi a conrpany tiiey tahe risk and their dividend ie nof
fixed trut is carc of preference share capitar the dividend rate is fixed.
12i What is meant by Reserves and Surpluscs?
Rcsc.*'cs is mthing hut tftc prafit tlrat i* rctaincd h,v accompany not by ttnt Fayitlg
it as diridend to the shar-eholders.
$i What are the t_ypes of rseryec ?
Thc fcllowiflg arc thc tlpce af rcs.c.nrcs
i -* ,-*r, rvvvrili& feSOl-v€,
fi. caErital reserir'e.
14) lYliat is m*a$t hy *e*ured !+ens?
f,,___ .
t

f ,can atnount hrn'orged hy the frrm hy piedging asset* {iei secrx'iti€s cre pr*videci
f+r th*se i+ans.
i5iWfuat is meaet iry unsecured iaans?
I$ thi* c.a*e si* s*c.-ni* i* pe+.,trle.d e:ta:rrple* ace fi--,ed rtepcsit*, t+aa* and
' aeivances- This is l'r}owrr as unse,]l}red ioa$s-
16) What is meant fuy current ii*hiiities?
Ciirreirt tri*bilities caesist* r:f am.:u*t .&*t is t* th* srippiir'* i*'hen gac'<[s *re
purciraee.d on a credii basiB, aiil'arrc€ paymffrts received aec.rued €xpe.nses, provisior-a fbr
utx,.
i7) What is meani hy income si*tement?
Thc c,rxnpanics act docs st*t any puticular way in u*rich firc prnfit a*d ir:ss
accourri or ihe ircsnre staiei-rtert has to tc prepared. This siste"mr.nt reiiects alie
pericrrmarce of a crnnpany over a rleriod critime.
18i Fha are aii the userc of financiai st*tement?
dr:] Ttie f*!ic,r+.'iag are fh* r:.sers *ff,inaacial state'm**t*
q:, 1- Ivlanageroe.nt.
Z. Shsrehaldere, in'wstrrs, an*t1rsl
? lmr{crc
4. Sttppiiete.
5. Ctstomers.
6. F;*rpioyees.
7. Csr,fifiEne*l. md e.gular{q- agencies.
o a4- -.---
6. trul€IB
i9) What is meant by cash fiow statement?
A firnt srould cntcr int* troublc if it spcttd-e morc cash *r** it is abtc to gencratc.
The lirm should generate adcquate capital tbr it $urvivel Thi$ is knswn as cash ilow
$lutISTTTETIL
}fii How the carfu fiow of a bu*inedr catr bG olaccifi*d?
Ca-ch flaw of * bri-.siress is clas:ifiecl a.e fellows
ii) i ilfffff#,T?'tr
*. finaricing aetirrtties
tli what is meant hY ratio *naiY*ic?
Eati* amtysi: i* orie *f;the pr:vre.rfu! tcrol fet fia*srci*l st.atel$e*t *nalysi*. F-ati+ i*
. nothing trut the relationrtrip betweerr tiao or rrr*ne itsms"
22i What are ilre diffenent ways of carrr'ing aut *u*iluis?
' DifferE:rt wai.s +f +arrying *'-:f. ana.$"*i* aEe a* f'ollosk*
a. ixst ratro
b. cor*petitnrt ratia
c= br&rstrial ratia
ri. pujected mtio
,
't

?s"r *'hat is m*a*t -n;,
p*st ratio?
The +t-rr*i:rt finaneial 3'eers rati+* em be c*mpale,,{ r*;ith the prr.r.r'i+rrs i,'*ars r-ati* tc
iinri rryireiirer ihe iinanciai posiiiorr iras improvecl over ihe ye.ars sr noi. This
24) What ic meant by com,oethoruu ratio?
The rati+ of a eonripa$;.' s?"n he eampared .*-ith the rati+ +f the eamrtetit+r* and
wiih iire. marke;t ieacier- This L* i:norrv-rr as cturiireiiiors raiio.
?5) what is mea*t by industry ratio?
Tte rati*s cif a firiri c,a$ b* c+mpaed rvith tlre rati+s of the i*&istq-' tr: qh!g5 th*
pari*.uiat fimi beioiigs io. Tiiis is iirroitrrr as indasiry rafio"
i. Wfuat is capitai budgetirg?
The terin'Capitai E,;dgcting' is r.rs*d intcrchangrahly with ieiiitel *r:p*rulitrre
managemerrt, capitai cxpenditure riec.isiutq luug lcur inwrtnir.i-rt decirior, i&ifrsfi€tl€ilt
of fixed aes€tt, eic. It mqv he definsd cR "pi*nning cveiuatirm snd geieciion of capits.l
er:penditrir+ pr+pmals.n Capitel hrdgeting hvalr.,es a s+rreat outlay'o6 sera=ies a-s +utla1.,s
of ca*ii iEsolirrlug in refiru foi.an antieipatrrd ftow of future irctefits.
Accorciing to G. t). Phiiippalys, it(-)apital irudgeiing is crmcernod u,itk iiee
ti!+c:t!iutt cf;'!r*:'s El:o:r{:ififidittclct! rescarces d$toflE the tt,tttllsble fftttilr.ut c,ititcrtu-xlti,ts.
The ccsnsicieraiion of inve#mexi apporiunilie; involves cvmparison of expec,ieci fuiure
sireams of ear*ings .ftom a proiect uiih immedi*te and suhsequent siream,c
",fovnr*r,lit rto {r,; it "
Lynoh - 'Cash budgeting co'nsi,s'{r' in pianning, deveiapmeni af c*ailabie aapital
..for the pxrc'hase of muimizing ihe kmg term prStabiW tn ihe utncem.t,
2. What are the importance of capltal budgettng?
Capital tr*dgeting is +f p*:amor*rt irnp+rtance ir fmancia! cleciriotr rnal'jng.
Speciai care shouid be takerr in making theee decisi,ocs orr account of tlre fbilowirrg
roassns
i. (Iver / iinder cqrrciqr - To inrprol,e timing and quaiity of asqet acquieition, the caqrital
expe'nditure decieion orust be caraftlly drcwri- If the firm hss inrcstcd toe nrueh in asseg,
it wiii iacur urneceerary ireavy expenditurc. if it iras rot sperrt eflougfu on fixed asset$!
two serious pohiemr flay arise
(i) The fi::rrs equipmeni may tr+t b* sufficie.ntly m,:de.rn t* e*able it t* produc.e
coryrtitiveiy.
(ii) ffit hae inadequate cqracify it may lose a pcxtirm of it* ehare nf market to itn dval
firm. Ta reg*in lost eustomers it would require hea=4y se.Iling e,x;le.$se.s, pri+e redu*tiorq
ploduet irqx'crveinerri, EiE.
2. Inwstment decision though taken hy indivi&ral concenrs ie crne of natirmal inrfrrrtryrce
becartse it determine* emplo,r,meat, econocnic actiltties aad eco**mic graw.fh.
3. Wh&t sre the capital budgeting decisions?
The f+ll+wing are the capital h*dgeting qleciricns
l.Accept i Reject decision
Z.Mutually exclneive fnoject decisirm
*1. Ca$ital raticning rteeision
,r'^]

i- ,j
4. --t?'fuat
ere ihe Kincis of capitai hudgeting proposais?
l- Ren{acetnent l niod-i{icatian a{fixec"!- a<:sefs - c.s- worit cul chscilctc arc rc.alaccr{-"'-1"-**-"-'-- ""'--J --'"&" " ) -- -----
ar appr-opfiiile im-re.
7. Expanrion - inwives an adciition of capaciqy io exisiing prociuctirm iacilities.
3. Muiertlztrti<;tt cf !*,eslltext expentliiure - t.hcy erate it easir.r fc,r a firni t+
reducr ci.l$t arki rluy cofuloide wiiir rEpiacernefit dr;oisforrr.
4. Straiegic *wes*nent propos*f - theee are capiiai burigeiing decisians which do
iiti e:sume that t&c rettrn: w"iMe im:itediate .-^,i' me*sr.r*d +-+er a krg i'renod +f thre.
$u'ategic irlestrne.ut are defcn*ive, trfferwive and mixuti motive tiecieion Tire veiticai
integratinn of a firm is an exaffipie of rieflensive investment in which a ccmtinuous sourc€
+f ragv ri:ateriele is ases*red. Hcrizontst conrbi.naticns are cftssi.se i$'!"sstsre.nts f+r tlrey
efisurt a fiun'* irfrmai anti exieurai gt'owth rEsper:tiveiy. Mixeti rnoiive investrnent arc
outiays on regearch and dwelnfrnent lnogramme*
5. f,i*,er-;tflca!':,:* *f busi:-,es,r - re€ar:,g *peratir:g m se-.oeral inadiets ,+r fii:n *ae
rnaf,i(rt into arir:tiur ftHt*el It nray ev€fl ffrrouni to cim*ging prudect lines. ''
6. Research awi deveiopfireltt - where the technoiory i* rapidiy churgmg rerearch
ae.J Cer,elap'rirsni sJEs is s *arriiauous sc.iil,ity iri a&y firiu. Uyrjall;'tr*rge sums of mon*3,-
atu i*vesieti in reseatcit and developnietrt aetivitie* wliicir ieati io iapiiai irurigeting
deci*ion.q.
5. What sre the Methods of invetment evaluatiou or crpital budgeting apprdsai
mef hndc?
There are Ef.wral methods of evaluaing and ranking the capital investmenf
proposais. The hacic qrproach is ttr compare the invesfinent of the projeci with the rehnns
derived &r'reof. The follow.irrg are m*in reetheds geaerally edcpted is $vestr*€.$t
----l-- -z'. - --
EVatuitu(,rt.
i. Fayhack period meilirrxt
2. Aecarmting I AvEragF r*te ofretm:r
3. Discounierl ca*ir flow rtrcthod / Tinre adjuetat teoiuriquer
(a! The pre*entvalue melhod
{b} Frafit*bility i*de,s / Bescfit co-qt retis
tci iniranai rate of rcttun
6. l&hat is Payback tuiethod?
It is * k*ditisnalmethort cf c4rital trg-dgetrng. It is the simplest ar-d m+*t **'idely
employed quanfiiative msthod fbr appaisirg capital expenditure decisiorrs. TFris nrethod
answers the guestirm - how maflJr yesrs wili it tske far cash ilerefits to pay the cniginal
cr:st rrf *n ial'estment norrrally direg*rding sallrage vahre. Cash bene{its here repre*eet
casli flow afrer tax (CFAT) teclurique ta pay tmck tire origfural ou'r^iay rcr1uired it an
inveetment poposai.
Tlrere are t',l,-c ways of calculating ttre paS,back peri+d. The first method cffr be
applied wltert the casfu flow strearn is in the raflte of annuit-v fcrr eaoir yeat of proje€t's
Iife, fnr cesh flow adjusted teclmigue* are tmifoffi. In such a situstion the initial crxt of
inv..-estment is itivided by the caostafit arunral cash flr,w. The s*-.o,od methc,d is tr.sed w'hen
a pojcct's casli flCIws are not EWal but vary froni year to year'. In sucii a *iftratio6
pqvbeck is caiculated hy the flroc€ss of accumuiating cagh flowe tili the time when
surri*b-ti'e uash flc*'F- are eqiial tc origine! ii1.,'estme.&t +i:t!a},'.
7. w*hat are the Accept I ReJect criterion?
')

f__ l
i he payiraci: perir-tti c.tr he used ac a deusion cdierion ro accE)r ryr reiect an
:--'^^'^--i --^'-^--!. Gae ai-'nlicatian .:'f this fechnitiie is t':--', ir-,mn*re tF,e :r,-f::r! r^.:r.'F.:.1*-U!r-'E>.i!!l=llt l!:l-!i!r-!l{:r, -----!i+,+i-'i'aLnilljii:-:i i.iui iL.!iu!itiii! i:: !-_.
p*riCIii with a pi'cdeiufiilfuled pat'oa*ii i.e.. tire ira"viiaeii sct Ep ir_v iiir rria&&gsrrirrrr. if tiitr
irctuai pcyhack periaci is iees tha* tire piedetennineci pqvhack, the gneject sviii he
E+,;Epte,i. If ":-ri.t, it s,'il! he rejeuted. Sjteinatirell-, '*'te pei/be,;k i,.Eii be ris-ed as a ratia*irrg
rire{il.Id.
When mutu.tiiy excfusive pojects ere uncier cy*e consideration, the3r may be
rai:Iied atesrdmg to the leagt.h ,:f pa3&aek peii+.J. Thirs ti:e pr*jr+t haviag the sh+f,est
pa-viiaek rlray ili a$$ig*t{i r'afi& olie foiiaweai in iire oryicr $o iirat iir* piujrci witir iorrgesr
pr.vhack might he ranked iaqt. The term mutuaiiy exctusive rsfers to ihe prcrposais out of
p,'iiicli ci-rli' slie c-=-ir t'e *+cegte.:I" Obr.i*us!5.'praject ivith Ehort-er p*1.'t'ack period n.rll be
-- - ! - -a - I
s€lEulE{}"
S. tr&'hat is imitative pricing metfuod?
ki'jtatir'e pri+ing method i* .*'eEy* shilar 1o the l**s leader pri+ilg me{h*il. TFris
prieing pcrlic.-v is olien used in rsiail ilusinesr"
9. What is turnover pr{eing methd?
Tlrsncl,*r i* the $r*fii which r!e*+tes th* sai*s ,;f the pr+dri+t The highee the
tilrrroa'er nieanr higher ttre sales.
i0. lilhat is riu*i pricing merho{i?
I-Tsi*lly the firm-q whi+h proiltu-e essential cormra+ditie* lra'.e part +f their prodrrt
under admirrishaiing pricing and part of tre product is soiid irr the fiee market.
li. What is price?
Hce is the sers*e +f, r*-'reaee f+r the fr*ri and it rtecides &e health +f the firm.
Tfre cueiorner accr.ptance or rejection of a product is rrrost of ihe iime pre.rioniinantty
infiuenced by pnce-
iz. -BhaL
are the external factoru infiuencing the pr6cising decision?
Tlc &ctors influcncing are as fcllnw.s
i. the c*mpeiition in ihe marke.t.
2. fhe elasticity of suppty and dernend.
*1. irerlds offie rrrarket-
4. purcita*ifig lxrw€r of brry-ers.
5. government policie* toward.q lnices_
13. lYhet is Acc*u*tiag cir.{*.'er*ge St*t* of Re.turs?
Reftuu on irlcsirneni metud ovurcorus die deficiet*ie$ of payira*k periui
method in the sefise that it ccrnsiderfi the eamingr of a grmject ovor itn entire econnmic
r:f^ltt-
il-fiu reiuRt rxr furv*rtrRett is estirffit€d i.e.. eamingr orpruftk esiirn*te{.l fiurn an
investtnent prnposai during its ecrxrnmic liig after pmviding for depecistion and taxes.
It meaas net pmfit &cm osti:natioo ara es Fcr tlie accarintirg prineiples"
2. Tite iate oiretum i* ccrtnpared w-i'rii cut offrate as ti*iennineti by tire man*gemert. C.ut
offraie ie the minimum rate of refirn on inrrestmer*" It shouid he generated frnm a profit
p.'hich is gr.nerally die finqr's cost of c.*pital. Ccst of capitel I5G,.a - cuf offrate ef r$f,ru:'r =
i5%. Tir cotttpaiison irelps nmnagemunt io ianft iIrc vadous pitrj'a;is anri seiuct iire mc*i
profitahie one. If rehnn em investment prnposai is iess than the cut off raiq it is rejmted
t

1
*nci ac*epred if it is equ*l $r' rlt$re ihsfl the cut rrif ruie. In case oi mutuaii-y- exci'.rsiv*
^l+^*^t)-.^ -^.^'.-^-^ .L^ --î-^+^ .-,;.!- L:î,-.. -^+^ ^f --r' -^l^^+-Jl.iHiTrirllmrfl r iala 1l!':rlta!1 !-;!i!! lil:,i!=r !4if.t!! l5:.!!rl! AIE ir:lEt+!r;t=!..==,J..=.
i+. rYhat are ihe Caicui*tion - iour wavs / methods?
-!-I-s f.^.r,-; ra;*ri nf :l-,ethnr{< :t'+ r< f;-,linrxrri
(ai Toiai reidrx oil ioiai irivesri-rirni
ihi Return per ffsnotmt /' n4ee of rnonev- invested
iit A-.;arzse i'=tl;n: nir i;r'.,iech;:e;r.i t-,e.iF'r,i,
. !- t-,-
ifli A-velagE tE[iitil oE av-filagE itlvrrstrllsill i-riEnlog
i5. What is Discounted cash fiow i Time adjusted techniques?
Th.r distingtisb.cd ch.arucfcnstic rf thc discauntcrt cash fiow-' capital budgcting
iec,hnique i.q itrai tiev tate into considr.ration the time l"iti€ oi motrey Erilile e""iEeting
the cost and henefite of a proieci- in iretw'een ftrm or a*oiher, aii these methociq rsquire
,^.rcF, f!r,=;s tnl.p ./.i.' ^---'^J -+ - ^^+î* ---^- -f, -----t-"3u' nelte;i cnst.!f r-enitzt {-nsi,-rf._.s;-::::r_:;:-r r.; i,-_.*i#e,.j!-ilr!,i;t! iii 4.je'.!ii:.!!! !diiE Ur ilu.I,!+liu.!a'f r_.ii-:.ii.- r_.ij=-.!.J3 L-4Fr:i::. :_..r=i:r.:
r;aplEai is tire ridiihu-rii'rt di*couut ffite that firu$i ii* eafiIu{i oti e pt'ojE€i that iea-vrs ,ai'r
riiscotmted io their present vsiues oniy on ihe ground that a rupee received at a firture date
is srrrth less thasr a fl.rFe€ re+ei.,.ei! trda,w=
i. it takas iriio a*c.oi*it aii tiie iretiefiis altd *o$t$ rrqctffiing iiuring fhe eardngs furpiufii
for m eniire etrmomic iite oitire gno-iecl
2. It rakes info **:c,r:nrtlie ti*efact*r w-.hil* r+elirstirig tlie profitabiliry- cf c Fioj+ct, iii
iire sursc tirat tii+y rtcog5iizE ihe iac.t riiLat the vairir c'i a rulreE tbc€iveri at a iuirftE date i*
iecs thtrr itt present vaiuc.
3. Th*y prarirle for uneertah!,, asid rtsk as thelr recc,gnizs the tinne fact' c *"hii.!.*
*vairuititg tiie profitabiiit-y uf itlv-etixient propor$als.
d- The,y ere rn$re.Bciefitific arxi dqrendahle.
i6. What are tIre Bemerits cf time adjusted tech*ique?
The demenls nf the techniaue alE as frl!+sis
1. Thery are complicate.d as they involve a good itFoourrt of calcuiations.
Z- The,y dn not cnrree,ncnd to the accounting concepte whiie recrrding coetc e?rd reservefl.
3. Th+'af,e fl+t srltr*le frrr rar*irg prejcct* regarding different crpit?l +utlay.
17. =fv'hat are the Discounied cnsh flow methotis?
The fcrllowingmethode lle the discounted cath flonr method'{
! Net nr"esent *-rah-re rtrethed
.-a
---l-- - :-- I --- --- -Lt- - I
/. rl't ri€rtt valuE muEx IIIEUI(X!
.i" Iliscount
i8. What is ir-,et preent value method?
The ca"h iaflcw in difrferent real.q are diccorrnterl (rerhreert tn their rtte*eEtt -laltle
b_v apFlying the appropriaie discouirt tactor or raie and the gross or ioiai present vaiuf oi
cach fians of differe*t ye:rrs ere aecerlained- The totai lnesent vslue of cash ififiorns are
+omgared *.'!th pre-reirt vehre cf ca*sh {r*tf[*e'* {e+e{. *f project} and the ciet pres*rt" ..,alil*
or tiu 6xc€s$ pruseflt veirrr oitlie ptoject md tire diffn'etice irctween tutai lxtsctti value
of caqh inflow anri lnesent vaiue of caeh outfiop,r ie ascertained and rr* this 'trasie,
the
veri+ug isr.",estr*e$ts prcp.+sals a.r* renked.
Cssh ir-rflow : eamiRgs i profite *iair iirve*'rnpnt aftet iaxee but lieforc depreciaiian

7
,
'i h* p,"eserri uaiue af cash outflor.,x : initiai cnet of iflr€strnent sn{i the coffi$rent oipr*jeet at .-;3ri+,=l:
i.:+i*ts +f tiri::re
i9. r,r'h*r is Xnternai rste af reiurn meths{i?
* Tire technique is aiso irnow'n at yieid on invesimen! marginai efficiency
-;a1Ee cf capitaf, m*rgiriai pr*di:ctivt-:- +f *ep!g3i r.:te +f reti:sr:, tirrr*
adjusteti raie oi iEilitrl aild sa un. ijke riei pies*ai vaiue. iritupal iaie af
reatrn meiirod aisei coneidens iire time vaiue of mcnev for ciiscormiins the
ca:h streams
r The basis of frre discount factor horvel,er, is riifficuit iri b$fh cas6s. In the
*cf pl'cs*tt l'atuc ractlt*d, tlrc disc.nuttt ratc ic thc rcquircd rafc af rcfurn
and ireing a pr+ieiennined rate, usuall-r. ca:st of capitai;rxi ifs dere.reiiflEftt*
sre extenrai to the prerpomi rmder considerarion.
* 'i"n..:*{r.:::*l *:ic q,,i':ri*::i i':: i}r+ c[hrrh;*rJ fu ]asc,i t::i.*rcis ,r]rich;EE
internal to tire proposat In otirer words: whiie *rriving at the required rate
of retun &r findiog +ut the pr*seot .=,alr,Ie +f e*sti*fl+*-s., i:iflc*.'s +.rurl
tutflows aii n$t urr-r.*idcrtei. Bul thc IFR d*1xrir:ls *rriir*ly rlt lhs igiiial
nulla.y ;rnci ca'+it lxnceeti.* of pqicct *'hieh ie -reing
cvciu.ate{i f$r
a+eegtarue or rqj**ti*a.
r It is therefore appropriatelS, referred to as internai rate of return. Tlhe IRR
i: i*:*a!I,l.i tiie rate tf reft-rre that e pr+;e*t eeliis. Ii is .J+fiaeri as the
tiiscouat rate wirich rquaie* the aggregare prfsefit vaiue ot-nei cash
infiows (tlFATl with the aggregate 1"***t viiue of carh ouffiav.rs af a
pr'':jeet. Ia other err,Js it is ihai rate p.'fu*h gi..-*s ths eei pr*sent .:al4e
i.frtfi.
) IRR is the rate at which the totai of discounteri cash inflnws equais the
1tt-aj
of Cisc':uased easr cuflsws {t!le iqitial *osr af isr-es*iie.Eti. E is us*d
wiiEIE tlte cost of i*vesfunent and its arullmi casii irfi*ws ar'6 ir.no*r.n ilui
tire rate of return nr discounted rate is not i..nown and is oqoir"C to he
ealciil#ed.
Eu. R'h*t &re tfue iimitetions of internai rate sf retur,,?
The I-itR suffms from *eriorle iimit*tirns:
i- l-t invcives tediaus calcuifitirrnr*. Ii invoives crrr4riicate<i compriation pro'blems.
2' It pr+d*ces multipls rsteE *&ic.h ess be c-e.rifi:sing. T1!e siftati+n arises in tlre c.eee ofrcrr-ccilenticrnal prajucis.
3' In euaiuating m'$rrsiiy exciu.qive propoeais, the project with highest IRR Eouid be
pi*!.--*'d r-p rn ex.:itrsi*n *f, ail othe.rs. Ilor,*.ev€r in 6..rectice it ma3,. oit t r* {,rrJ t* be the
11*i.
pt'*fitabie ar:d *c'ttsistent wiih iire *ilje*tive ai fiie furi,r i.r., maxi*rizatiu* ofsnafenotders weaith.
4' iintier IRR, it is acsumed that ali intermediate cach fiorf,,s are reinvesied st the iRR. itis ratbe.r riilicu!,:r-rs to tlrink that the same fi::n has tlie ahi!i4,. t* reie-r.,es.t the *ash fl*s".x at
diffote*t tatcs. Tlte reiLesirne*i rute a*surnptior urder tire iRR is ifuerrfarc ve.Enreaiisiic. F'{orecrwr it is not saie io &rflurre ii*-"y* that intermeeiiate
"r*h
fi;;.; ;;;the pr+jsct niey te relcrvested at ail. A po:ti+n af ea* i.i:fl.r*.* ,,1a,,, t,* paid aui es
riiliden6$. a Fofiioll rnay Lre tieti up witii *unrnt asricts sgcir as st*ci.; casit *tc. Cieariy.
the firYn wiii get a rvrong pictme oi ihe pro-ieci if it assumes ihat it invests ihe er*ire
interme":iiate cash procee.Js.
i)

Zi. Wh*t fire the meriis oi nei* preseni r,aiue meihoti?
'ft-- *^-:i^ ^S+L^ -^+ --.1d.ai ,,^1,,^ ..^^+L^.! :^ -^ C^11^-,^
; ,:_ _-._. _:-_-, :'. ^.-"__--_--- --, -
i. Lllg t-{los. srgtuitcarii advailrage Is riiat ri e.tpiicttiy rec.ogruzss iFrs ume vaiue or"nioney.
e.g., intai *"*il f}.r..,* pe*einmg tc te,o mach-i*es o'* *q,*i hut ti're *eE firessnt vaiue are
.ai6^^---l L^-^---^ ^C -'i-of^-,-*^.-^ -f -^9.----!- -++.:aa-- .Tn-^
"-*^t E^-- -.--^_-:_r-_-.L^+iai=!qiili u=1J.iu=E u.!.'--!.i.!.i,EiE!i1j,E5 +i. ilr{aitslll uj.';IJ.ll nlriErt-l-q. ii-ri !-iEi.; I+1 lec+f!-ii7!ii.a lji€
iotai r,. +iue oi $ic{rg_y is iiru$ xatisfieri.
Z. i-i aiso fuifiiis the secoaci atiriirute af a sormci methoei of eplnei*ai. In firat ii considers
trrE tctal heiref;ts arisir:g ,:,iit .:f i:r+p+sei *r=,er its iifb tiete.
3. it is prafiiculari-v- u.sefirl f+r seieciiotr uf fiiui€aiiy e;xciasive pruj'iuis.
a" Tiris methcxi of asset seiectirvn is instrumentaifrn achievi"giit* airjective of fmanciai
i?ie-r€grnleiit, i".,'!ri+!i is &e *r*:.;ir=izafi*ii cf '*ie sh*-re.!r+l,jer's r".'ealdi. iti t'rief A"re preserrf
vaiutr iniiiiori is a iitec'ieticaiiy conec'i trciuriqur in iire *ri*ctio* of investrneni prup,*rsais.
2i. l&hat are the Ilemerits ef net preseni value methoei?
T1-re rl*nredt-c {f t + ;1Ef preseiri r.*!ri+ ni*t!r*d fli:* as foll+'*;:
i. ii is tiiilicuii to caicuiate as weil as to untierstand *rxi use, in compari*on witFr payb,ack
msthod or werage reium method.
2, The sec+fld atrd mcre seri+r-rg pr+t-.lem +gs+eiste.* +:ith. pre*eet vslrr.e meth+d is th.et it
invcriw.es caiuuiations oi -dre r'equired raie oi rgtufii io discoruri tire Easir fiows. Tlie
tiiecount rcte is the moet imfnn'te*t eiesnent u.qed in the eaicuiaticm oi tire pesent vaiue
he.:errge rliffet. etlt rli.r-r.rlrrnt r?t?E s;ilt +i.re r{iffereiit frrFcFn+ rra*raa T'trp r+i *rir;+u:.g!'r!'::! s:r!-_rsai a*i'--a_ ai4 BiiV UjrL'lL':i; ijir?+e:s+ i+i+:--8. iIi.- i!.iEiir!
desirabfiry of a prolr+tl*ai w-iii ciiangs wiih liie ciiange oitliscouui r"&r. Tir* irupr'6a1rc* o1
the discount rate is ihrae ahviotr"c. Eut the caiculatiori of required rate of ret* x pursuits
serirrtrs tinhlem- The cnst of canita! iq -anerellr, the F.ecis nf +he firrtrrs rl.jccn:rtri rzte T},e
caleuiatioit (rf c.{rst of capital is very eompiicatcd. hr faci tiirrc is * diffu'ence uf opinion
even rqga'ding the exact method of calcuiating it.
t ar.r.rtar c}.nr+.--nn^.in.r is t{ra* it ic an a}rcnftrrp rrariirrrF ThiS lgetl1gd r,ril!.3niant t}.e!'! : Er'''sEvr L':rur:v-Jrrs!6 r- Ei+i t. it ri +UL-:Ji*aL- iiil-3!-#L-. .ll:i- til'L.lli-,'* -fii.l-i efL.L.t"Pl iiiE
pruject wirich iias ldgher pl'eselrt -vaiue. But ii is likely tliat iiiis proj€ct ftia:y ai$,] irloive a
larger initiai outiay. Thus, in csse of pojectr involving <iifferent outiayq the gnesent
yahre rnay aot give depe.adatrle res*lts. ^
4. The pr€{i€t$ vaiue ffietik d r}ray aiso give satisiactory r'rn*rliri iii ca*e of two prrrje$is
hsving different eiiective iives. The project with a shrxter eccmrrmic life ie preferahie,
nther thinos. hein.-t eott-at It rfi-aa-t h€ that a nrniert r**rirh hes a hicher rrr,.c,=nt rnlrr; n.rr-'*'uaE-a qr6u L'=*ar:- ri ii.* J L'i' ui*ir + ijiuJ!-'!i iElavii rlcL= G iij'6:i'uj' ijii.5!.iii Yrliljl- iiiG_7
aiso li*ve a iaiget'ecorrofidc life, rro tliai f$e ftrids w-ili iurnafui irlesied ftn- longer ptrt"ioii
while the aitemstiv€ propo$sl may hrve shorter iiie hut smeller flresefit v&i$e. t-rr euctl
shtati+ns the present t'altrc me*.hrd ma;* net reflect the tr*e wori.h of aiternati-ue
pi.opcnals. fiiis rneiirod is sait*iii* fur evaiuatfuig projel;is wirose *apkei outials crt'cu$is
difier significantiy.
UNII V
COST Aft{Ii EREAK EIEN AFIALYSIS
i. Say saine of ths mair fsst co$c€pis.
The cost ccncqrts sre rs foilows
!.) Act+al c+sts and app*rlrurii;- e.*,.tts
2) in+rerueniai co$is and *unic coets
:li F.xplicit cosiq and impiicit cost*
.L Fast nnsfe znrt firtrrrc rn<tcr*r* !. -_.L.+r*
5i Accouniing cosfti artd trcoti{riliir c{$is
i
,

4.
A i T-xrpr.i nnsl qori inAiceai r*et
t r,-i-.^+^ ^^^i^ ^-J ^^^:-t ^^^.^,j
-
--a. ?!-!-! -
ii i i ,BiIti-rtiiiiiir: r-y-r*fri ;iiifi iirlii t;llririiJiialliE C{"!5IS
-:
lri Repiacernent costs efld ofigm3.i coelq
i n ! cl--^l^- -^ 3 -i- ^^ l-^--
!r-rt l ----L-- -.--:-!- -- .
j i i utgEiit {7Jstii ifii(i ixrsr-trJiia$lE coJEs
- -: _ *
i2iEu.esiness cosis ffidfuli costs
-- r'-'-
' !1----.---" ---..-.
i +i siiolx l-ufi afiG iolig l-rill r;i}st$
I 5i increrneilLri coste and marginai costq
Z. Whai are actusi costs and opporiunity casx ?
,t ^+--l ^^^+^ *.L-'-i. - {a* .:-^---- f^-
--^J..^:-- ^- -^---:-:^* - --^l--^+ ^- -
sEr-L'icE". As exanipie fbr ihi-q is the cost orl rarry mate.riaiq iabor, renr= tntr.rtrsi-
5. What are incrementai casts *nd sunk co*ts ?
I-ncrerne$isi cogt i.c the additiocrai cogt ciue to chsnga in the lsvei $f natwre
.^,r !-.r:ciaa<c rc.tirii-r,' firrnt c..-.cfe :rc the c;r.ct< th=t are rri-.t zl*e.re{. !-;; = ch;rtcre it
qri#ilii-ry pi'ndirc€{i afld catuiui be ttcc'vefc<i.
14"hat are Expiisit ccsts and implicit costs ?
F.:rplicit c'r paid aut caste arc thorc ci-pcrlsas q;hich arc ac.tua!!r.,'paid h,v thc
c-.--.f-...,:.:a..-a---.aL-aL-^..-a:^.|-_.L-:-L|--
ltilii- tlfipiictr co8rs are fire lrreoreiicat cffits lrr tfrE sf.Irsc Ifint iltf:y go iinrecognizeii
lry the accolmtirlg Fr-vstem.
Lli*rat qpa nas* cna*< qnrl frrfrrra nns*< ?
La-- --L--l ----L-- l.- -------I !- i!- --------tl-- ----2-:---3
ra8[ c{rtitt irlE urE atiLui$ (a]$t$ II[ultrI.E$ lll uts lra$l aIE gtrIltrI;rrlY Eonutultru
in ihe fmanciai rccormts. Fuhrre costs sre coffts thct ffE expected ta nccrrr in soms
firl::re. crari..r.'l nr nerin.{q
What are &ccounting costs end eeonomic cosis ?
i ^^^---s-'-- ^^-1^ -G rL^ -^r-^t ^--+l^-. ^^^.^ T;^^-^-:^ ^^^+ ^^l-t^ t^ +
war,f+J +aq Hf! E!.r.s-+Gt r.-trr? *r-r;t.'tr*t.Lj a..-r a.h.€
L-L---
-rurLll tr
ttnat ts glrect ano Inolrect cost,
Ilirect cost are tracethle cost or arsignairie crlst are the ones iftat hcw
Airect ,.1*in;t<Lir, r::,'i*,i-r : ::*ii nf nr.et"=*i..:n lil;e * n;,^..-ftr;'* , r.rrrt.Fa€ ir,r : r,rntlttr*
or & drrpar*finmt oitire furii. Crn iiie oiireiitasti furdirar.t co-is or nort ft'acrrai]ie cosis
rN'corilrnon or non assigrahie cnsts are the co*ic wirose cou{Ee canflot'tre ea.cifu
^--3
'^e^:l^l--
-----J r- +t-^ ..t^-r
?-:-* -i-J::ri-:j * *1!'-* i-J *:_-'
lVhat ere private cccts *lrd social cocts ?
Ilrir-,'atc ccsts arc thasc qihic.h arc actuath.-' incurrcd nr nrcrridcd for fitc'-' r-'-'
tffsiness aciiviit' b-v an individuai or the busines-c iiiru. Social costs on the
othedrsn{i are the total coste to tire $r}ci€fy on account oi p'oriucticm of a go$d.
Wh*t are eortroilable *nd non controll*ble ccstc ?
{;ontroliahle costs are those tt,trich are cn$a-irie of heing controiied cn
rerniiate.:{ h., fhe ,??aiiaireflc efif = .:I it .an he r:se,:i in aqsesc fhe rmanarrerial
6"
*.
9.
'

-4oriucti*n c.nets afe wuaif iov,'er inhigger piente ihcn smaiiel'piant'e'
i*. iv'het is cost?
c;asi is the money speni on producing ffrd seiiing a product ta tire crrqtnnrers-iire
.*.+"*t cf a pr*di-ic.t si.sris fl+:r*r &e rer:, rr:rste.ria!.E *:r+uigh pr+di:';ticri ++$t-q till :*l!hg c'*ts
iri*iude iiie r;oxi in triainlai*irrg outieis'
Zti" what k the signiiicanee oi cost in manageriai decisian making?
.Etr.rdy' +t- easJs i: e,cseetial &r makiag a claaie* b*r' arr:t.g tlie e':riipetiag
Frroductioft piuo*. Fr*riuciion de*ieioEf afe Irot i]Ceribie wiihoui their resps't'tive c'ast
ccmsiderations.
2i. what is Price oiinPut?
If thc pricc af thc ras. matcrials laboq pc,ta'cr inc'rcascs thc'n tatura!!'r' t.!rc c'ost c'f
prr:dur:iiu[ gofs up. ThLc csst of productioru variee directiy p-ith the pricer oi'ii'-Etii*'
I

l'
C E 345 1 -E}{GINEE:RIfi{G EC{} rC&{IC s AF{B Co sT ACC t}T${TINC-
*ITE$TICN SANH
tr-NIT - I
l. IldneEconomics.
2 " Deline Il{anagerial economics.
3- What is ir,iicro ecorrrrmic arrafrsis?
4" tr1&at are hdacro ec+nomic conditions?
5. ltr&at ar*. the ob-iecti.i.e.s of a business firm?
6. i4lhat a;+ the otliectives of an errterprirn?
]. What is cost analvsis?
8. Wtrat arr ihe r.rsss ofcngin*cring cconumius?
9" D*in+ hdargiir;rl cr''sting.
10" Define marginal rtrv6.r1utr.
1 1. Explarn +poorturuties cost arinciple.
i 2. Ery.rlain tluee ;;r-incipk of tirne ;xrspective .
13. Vh-v is there a gap betrveen thecry of the {irm and managerial economics?
14. E4plain iiow risk a'd urceirai'ty aftect decisicr,,raking
15. Explain the scope ofEconomics.
16. Discuss l,hc impurla.ncu uf '"E.'r:numicJ, in tlecisiun making
17, lVrite ary two of firms.
i 8. Stnte the decision making under uncefuainty.
19. State the size maximization tlreory of the {irm.
20. Explain incremuntal uuncupt.
2tr. Iilustrate with examples sales maximization
22. Dcfi ns Brains'Lorming.
- .l

LINIT-tr
1. Dedlne Demand.
7. l&rh;it is Demand lich*duis?
3. 'r1'?iat are de.mand determinants"?
4. De.{inethe lav",of De.rnand.
5. 14'hat is Demand Siit?
6. .Ds{inr Ela-sticrt-l' of Demand.
7 " De-finc priuc ciasliuil-}, ollDcmanrl.
L De.fine income eiasticit_r'.
9- "Deilnc crcss claslieill, i.rf demami-
10. lVhat a aso+ertising eiasticir-r* of de,mand or promotion eJasticitS,?
11 lri a: n ,tf--- ---:- -n
I t. wlIAt Ili llElrlallu rult u<isul]B,
12. Purpose clf forecasting de.mand.
13. E'haL aru fhc stcps invulv*i in furccasling?
14. li{rat rs the opinion polling method?
1-1. Wtral is custumer survey?
16. ltrtrat is expe.rt opinion method?
i 7. Wirat is r:trrn;:lrte eflrutteration method?
i8, lVhat is s*mple survey?
!ft trf,- r:- , l-,. ---al---lO
I )r. !4y IIat ts eilLt usE IItsLIlu(t,
?0. What is Delphi method?
21. What is Truntj mrthod?
22. lihat are c-vclical changes?
4.r rrfl--z i- n-1--t- l r- -I---l----nL). W I14L Is l_"rtrrPltl tEUrUilqUE i
?4. l4ihat are seasonal changes?
25. Whal is irreguiar m$vcmcrd?
26. Define supply*.
27. 'rffhat is supply sehetiule?-
28. l4.Iirat is suppl3.curve?
29. Detine tL-re lart' *f supply.
30. 14{r*t are the limit*tions of law of supply?
3i " WhaL is marke'r ecluilibrium?
32. Ddnethe elasticit_v of supply.
33. Dctinc purftell-y elastie supply.
34. Define the perfect$' inelastic suppl1'
3-5. Dcfine uniLary claslic supply
36. Deiine relatively elastic suppl-v.
37. Dsfinelhc cruss elastiuily o.f supply.

LINIT-III
1. Defrne Pr+ductian.
?.. Deiine the term factors of production.
3. Dcfne ioiai praducl.
4. D*{ine margin*l product.
5. !trtiat is short mit pr*ducti*n flurction?
6. lVhat rs long run productir:n fundion?
i. Dcfinc is quanl
8. lYhat is input-ottput is quant or angied isoquant?
," WhaL is increasing return iu ss&lel
10. 4&at is constant return to scale?
I l. Explain the actual cost and opportumty cost.
12. E.xplain fncrcmenta.l cosl arni sunk cosl
13. Explain e+rplicit cost and impiicit cost.
14. Explair ptivate cost and social cost.
15. Explain direct cost and indirect cost.
16. Explain contn:llablc uosl anci uncunirollablc cusl-
17. tr{rat doyou mean as internal e*onomies
18. Explain Productiun lunctian
I9. Discuss kast-cost cornbindicrn of inprfs.
20. What zu'e retutrs of Scale?
21. Explain Isocost.
22. Statu Law o["fncrcasing Rcl.urns of Seide,,.
23. Defineh,fRTS
I

LINIT-TY
1" What are the factors goveming the pricing strategies?
z. what zur ihe *demai lactriix that irrlluertce the pr-icing d*cisitii?
3. What are.the internal factors that influence the pn$ing decision?
4. WhaL are ihe priuc rieierminar'ls?
5. What are the objectives of pricing policv-?
6. Whal rs r-;i-:st plus pricing or lull cr:sl pricing?
7. What is target pricing or rate o{'retum pricing?
8. What is goitig rate tr'ricing?
9. What rs customarY Prieing?
1t1.l&Ihat is ryclical pricing?
11. What is initiatir.'e Pricing?
12. ILal is iiluilist-ralcrl priuiug?
13. What rs Dual Pricing?
14. What is price ,liscri*iiuatitrl ur ditTrreirt pricing?
15. What is Ps:*chological Pricing?
16. WhaL is skimming Priuing?'
17. Vhat is Penetration Pricing?
18. What is Premiun Pnuing Polii;Y?
i9. State the arguments in favour of monopoly'
20. State tlre argtunents against rnotropoly'
21. Explain equilibrium point rn case of monopoly'
22. Exptai:a Pticr Cullusioa
23. What are the cause' ofmonopolyl
24. Disr,usi Advcrtising anri sclling cost in oligopoly'
25. Differentiate Oligopoly and non-price competition'
26. State price leadrrshiP.
27. tr4rat are pricing olrjectives?
28. Explain thc signifiuance o'fpriuing'
29. 4&at is marginal Pricing?
, ';

1.
L.
{
.+.
5
6.
9.
10.
11.
l-1.
14.
15.
i5.
1-
tt.
18.
19.
?0.
LINTT-17
Expl;rin lhe need for finenciai analvsis.
'vtrihat d* ;vou irrf,cr fru*r tlie trxn "iiquiclity *f a flrrii"?
H*n can the liq*idit-v of * {irm be er.aluatedl?
Expiain lcveragc raLir-r
Erydein tlx significance af delrt-equity ratio?
Lisl riown thc actir,rly ratiu.
How ta &te.rmine the payback period?
Vvliat is l.lPV arrd PI?
i4.hat is *cceptsnce ruie of Pay back and ARR N.{ethods?
14{rat ar-e differenttypes of ratios?-
lVhat is ftnd?
4ft4t ;r* the sources of funds?
ltrat is depreciation?
lYrjt*:iorrls uses of car;li 1)ow a11aly51*.
Differc.ntiate cash ite.ms and non-cash items.
Explain cash from olrer*tions.
Deline grrolitabiiity Index.
What is capital rationing?
What are the sr:ruces of finance ?
What are the tlpes of preferences?
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