Roll Number:

Thapar University, Patiala

School of Humanities & Social Sciences
Mid Semester Examination
B. E. (Fourth Year): Semester-VII Course Code: UHU-081
(ECE,EIC & ELE) Course Name: Engineering Economics

September 20, 2016 Tuesday, 13.00 -15.00 Hrs

Time: 2 Hours, M. Marks: 30 Name Of Faculty: SCB,RKS,ANS,KW,SCH
& SD

Instruction: Attempt all question in proper sequence.

Q.1 (a) Problem of choice is the problem of problem of allocation of resources. Explain (3)
How?
(b) What is Engineering economics? How it helps to the engineers in decision making? (3)
Q.2 (a) Define price elasticity. Explain the different methods to measure price elasticity (3)
of demand.
(b) LAD Enterprises sells mobile phones, currently charging £80 and earning £9,600 per (3)
week. It is considering a price cut of 20 per cent to increase its market share, estimating
its price elasticity of demand (PED) to be -1.6.
i. Estimate the effect of the price cut on LAD's revenue, stating any assumptions.
ii. If a competitor responds to the price cut by also reducing its price by 20 per cent,
estimate the effect on LAD's revenue, assuming the cross elasticity of demand
(CED) is 0.8.
iii. Compare the profits in (a) and (b) above with the original level of profit.
Q.3 (a) Define and give an example of each of the following demand terms and concepts. (3)
Illustrate diagrammatically a change in each.
i. Market demand curve
ii. Inferior good
iii. Complementary good
(b) Consider the following demand and supply equations for sugar: where P is the price (3)
of sugar per pound and Q is thousands of pounds of sugar:
QD = 1,000 - 1,000P
QS = 800 + 1,000P
a. What are the equilibrium price and quantity for sugar?
b. Suppose that the government wishes to subsidize sugar production by placing a floor
on sugar prices of $0.20 per pound. What would be the relationship between the quantity
supplied and quantity demand for sugar?
Q.4 (a) What is Demand forecasting? Discuss in detail qualitative methods of demand (2)
forecasting.
(b) The following is the information related to sales of av (4)
Years 2007 2008 2009 2010 2011 2012 2013 2014 ' 015 2016
Price (in Rs. 20 25 22 18 27 23 33 39 36 42
Thousands)
Sales (in lakh 15 12 14 33 10 15 18 24 28 23
units)

i. Obtain the Regression lines.

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 ii. Estimate the demand for 2017 if the estimated price is Rs. 37,000/-.
(2)
Q.5 (a) Discuss the various determinants of supply.
(4)
(b) The accompanying table shows the price and yearly quantity sold of souvenir
T-shirts in the town of North Zone according to the average income of the tourists
visiting.

Quantity of T-shirts Quantity of T-shirts demanded

Price of
demanded when the average tourist
T-shirt
when the average tourist income. is Rs.4,00,000
income is Rs.2,50,000
Rs 400 3,200 5600
Rs 500 2200 4800
Rs 600 1500 3500
Rs 700 700 1400
i. Using the midpoint method, calculate the price elasticity of demand when the
price of a T-shirt rises from Rs 500 to Rs 600 and the average tourist income is
Rs.2,50,000. Also calculate it when the average tourist income is Rs.4, 00,000.

ii. Using the midpoint method, calculate the income elasticity of demand when
the price of a T-shirt is Rs. 400 and the average tourist income increases
from Rs.250000 to Rs.40, 0000. Also calculate it when the price is Rs. 700

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