Internal Assignment For June 2025

NMIMS Center For Distance and Online Education

Sub- Micro Econmics & Macro Econmics
Q1).
Rohan is a business man who is involved in organic farming business. Due to the high
and un expected demand of organic farming products from the side of consumers,
Rohan is now facing multiple problems. Problems like requirement in scaling up the
supply, unprediactable weather condition, labour salary expectations, government
regulations are just many of them. To help him grow his business, it is very important
to understand what does the concept of "supply" mean. Afer understanding it he can
overcome the hurdles faced now by implementing the stratagies that we are gonna
discuss further.

>What do you mean by Supply in Agriculture?

In agriculture or farming , supply means how much crops or the output can a farmer
like Rohan can sell at different prices over a specified period of time. Many things can
affect this supply, bringing chances and problems for farmers.

>Factors Affecting Supply

1. Weather Conditions

Weather is an very important factor in farming. Bad weather like droughts, floods,
and storms can affect crop yields a lot especially when considering organic farming as
it is very highly dependent on a good weather condition . Rohan may try some
strategies to deal with these problems:

- Using Technology : By using technology to predict weather or understanding

weather forecast and using crops that can handle bad weather, this would help him
plan better and reduce the overall risks. This might mean using crops that need less
water or can survive floods.

- Growing Diverse or multiple Crops: Growing different kinds of crops thatare based
on different weather can help reduce the risk of losing all crops due to bad weather
that might ocuur on an sudden. This not only reduces risk but also lets Rohan offer
more types of organic products to more customers on different price points at
different types.

2. Labor Costs

High labor costs are a big expense as organic farming requires more number of labour
and related labours hours when compared to regular farming. Hence, Rohan can try
the following solutions to manage labor costs:
- Using Machines: Using machines for farm work can reduce labor costs. Machines
for planting, harvesting, and packaging can help in reducing number of workeres and
dincrease in the overall efficiently of the farming process.

- Training Workers: Training workers can make them more efficient, which reduces
the combined labor costs. Trained and skilled workers can now use advanced
machineries and farming methods that increase yield and reduce wastage.

3. Transportation Cost

Transporting produce to market has a lot of expense to it,aand when considering the
overall logistics involved in the farming process,transportion of the crops plays a
major role in it. especially with rising fuel prices.

- Local Partnerships : Working with local retailers and distributors can reduce
transportation distance and overall costs. By setting up nearby distribution points,
moving crops becomes easier and cheaper.

- Planning Routes ahead: Using software to plan efficient routes can save fuel and
time. Good logistics software can optimize delivery schedules and routes, keeping
produce fresh and of good quality.

-Eco-friendly methods: Using eco-friednly methods of transportation like by using

EV-vehicles can lower the expense , plus it increase the impact by letting people
know that rohan crops are not only organic but truly green in every other small way.

4. Government Regulations

Farming regulations affect things like land use and pesticide use. Strict pesticide and
fertilizer restrictions impact farming methods. To manage this rohan can adopt the
following-

- Knowing about regulatory changes or updates in the norm and following them can
prevent legal troubles. This means talking to agricultural experts and attending
workshops or seminars on regulations.

- Advocacy and Engagement: Joining local farmer groups and talking to government
officials can help push for better policies for [Link] try to get subsidies and
grants that are meant to help organic farming culture in the country. Building
relationships with policymakers can provide insights into future regulatory changes.

> Methods & Strategies that can be used to Grow His

Business
-Do Market research

Doing market research to understand what consumers want can help choose the right
crops,to increase the chances of profitability ultimately resulting in the business
growth. By checking market trends, Rohan can find problems in his markets and
change his crop choices to stay competitive and be innthe advantage.

-Embrace Eco-Friendly Practices

Using eco-friendly farming practices can make Rohan’s brand more attractive and
impress the consumers. This will also help him get the government incentives and
grants. Practices like organic pest management and sustainable practices improve the
farm’s impact on the nature and attract customers who care about sustainable
development.

- Financial Planning

Creating a financial plan for unexpected future costs and looking for funding options
like loans or grants can give the money needed for growth in every aspect. Financial
planning includes saving for emergencies and investing in high-return areas while the
money is not in use currently.

-Consumer Engagement

Building a strong brand and engaging with consumers through marketing especially
with the increase viewers through the presence of social media can build customers
and the associated customer loyalty, which might also allow to charge premium
price. This could involve storytelling about the farm’s commitment to quality and
sustainability, creating a story that connects with consumers and their food safety and
quality.

-Invest in Technology

Investing in modern farming technology, like precision farming tools, can optimize
resource use, improve crop yields, and make the farm more efficient. Technology like
drones for crop monitoring and soil sensors can give real-time data to help Rohan
make quick decisions.

- Sustainable Resource Management

Using sustainable water management like rain water harvesting and drip irrigation and
soil conservation techniques can ensure long-term productivity and environmental
sustainability. Efficient irrigation systems and crop rotation help maintain soil health
and save water.

-Collaboration and Networking

Working with other organic farmers and joining agricultural networks can allow for
knowledge sharing, resources sharing, and problem-solving which can be done with
joint efforts. These networks can offer new insights and chances for joint ventures or
cooperative marketing strategies.

-Quality Assurance

A quality is the main key that every customer expecs from organic farming .
Maintaining high-quality produce through strict quality control can set Rohan’s
products apart, improving customer satisfaction and loyalty. A strong quality
assurance program ensures only the best produce reaches the consumer,but also
increases the brand’s reputation.

- Explore Value Added Products

Making value-added products like organic pickles,jams or juices can diversify

Rohan’s offerings, creating more revenue streams and attracting more
customers,which could also increase the brand value. such products often have higher
profit margins and can be sold at premium prices.

-Customer Feedback and Improvement

Getting customer feedback and improving products based on it can increase the
customer satisfsction,along with offerings and strengthen his market position.
Feedback can be collected through surveys, social media, and direct communication.

In Conclusion, by understanding the above mentioned factors and using strategic

actions, Rohan can grow his organic farming business to meet demand while staying
profitable and sustainable. By using technology, building consumer relationships, and
staying flexible with market trends, Rohan can handle the challenges of organic
farming supply and achieve long-term success. These strategies will not only help
with current challenges but also prepare Rohan’s business for future growth in the
changing organic market.

Q2.)A.

Here, Aarav is dealing with a classic case of price elasticity of demand. This is an
important concept in economics that helps businesses understand how changes in
price affect the quantity of a product that consumers are willing to buy at different
points of time.A 10% increase in the price of his signature burger made , sales
dropped significantly. However, when he increased the price of soft drinks by 15%,
there was little to no impact on [Link] lets understand this by the concept of Price
elasticity of demand.

> What is Price Elasticity of Demand?

Formula:-
PED =%change in demand / %change in price.

Price elasticity of demand measures how sensitive the demand for a product with its
consecutive change in its price. When a product is price elastic, a small change in
price can lead to a large change in the quantity demanded. On the other hand, if a
product is price inelastic, changes in price have little effect on the quantity demanded.

In this case, where a small increase(10%) in the price of the signature burgers leads to
a large drop in sales, the burgers are likely to be in a price elastic situation,. and if
raising the price of soft drinks (15%) doesn't significantly affect their sales, then they
are in price inelastic.

> Why Does This Matter?

Understanding the price elasticity of your products is crucial for making smart pricing
decisions. It can help you maximize your revenue by setting the right prices for
different items on your menu. If you price your products too high, you might lose
customers. But if you price them too low, you might not generate enough revenue to
cover your costs as it could reduce the brand value and the associated brand image
with it.

> Recommendations of strategy for Aarav

1. Analyze Data on Sales and Prices: First off, gather data on your sales and pricing
history,along with analyzing the competitors pricing as well, By analyzing this data,
we can identify which products are price elastic or inelastic. This will give us a clearer
picture of how the customers react to price changes.

2. Segment Your Products : Once we know the elasticity of different products we can
segment them into categories. For example,the burgers might fall into a category that
is highly price sensitive, whereas soft drinks might not. This will help tailor pricing
strategies based on the characteristics of each product.

3. Experiment with Pricing: We can experiment with small price changes to see how
your customers react. Start with a small sample of products and adjust prices
incrementally. This way,the observation of the impact without risking too much.

4. Bundle Offers: Consider offering bundle deals that combine elastic and inelastic
products. For instance, offer a burger and drink combo at a slightly reduced price.
This can help increase the sales of elastic products while maintaining the high margin
of inelastic ones.

5. Focus on Value: Customers may be more willing to pay higher prices if they
perceive additional value. We could Consider adding unique features to the burgers or
enhancing the dining experience. This could help justify higher prices and reduce the
price sensitivity of your burgers.

6. Monitor Competitors: Keep an eye on the competitors pricing strategies. If they're

offering similar products at lower prices, the exisitng or new customers might be
tempted to switch. Understanding the competitive landscape can help us make better
pricing decisions.

7. Customer Feedback: Collect feedback from the customers about their perceptions
of and satisfaction with the existing prices. This information can be invaluable in
adjusting the pricing strategies to better meet customer expectations.

In conclusion, By understanding and applying these strategies, Aarav, can make more
informed decisions that will help maximize your revenue without alienating your
customers. He should also focus on thr price strategy cautiously for different products
,where in this cae being Goument [Link] key is to balance between offering
value to your customers and maintaining profitability for your business.

Q2.)B.

Here, Neha is a young professional who recently got a big promotion with a good
salary hike. Even though She's quite excited, probably because now she can afford
some of the finer things in life that she always dreamt off. And hence she decides to
start buying premium organic food, some fancy clothes, and even gets a gym
membership. It's like her lifestyle is getting a complete upgrade. But in between she
notices something interesting. Some of her colleagues at her work, who actually earn
more than her, they're still sticking to budget-friendly things and life and saving their
money instead of spending it all as neha did with her money. So, what's the difference
that’s notable her ? Let’s take a look with the help of economics.

>Understanding the Income Effect

There’s this concept in economics called the “income effect”. It’s quite simple,
actually. When a person’s income goes up or increases gradually , their purchasing
power also increases. This means they can afford to buy more goods and services or
buy better quality stuff than before, overall increasing the standard of life. But how
this extra income affects their spending habits can vary from person to person.

>Impact on Normal Goods

Now, let's talk about normal goods. These are the products whose demand goes up as
people's gross income increases. For Neha, premium organic food and high-end
fashion brands are now normal goods. Since she’s earning more, she's naturally
inclined to spend on these better quality products. For many, it’s a way to reward
themselves for their hard work. When income rises, the desire to shift from regular to
premium goods is quite normal. Neha feels she deserves it,at this point of her life.
> Impact on Inferior Goods

Then, there are inferior goods. These are the goods people tend to buy less of as their
income increases or in another words when people have less money to live with.
They can be basic or budget-friendly products. When people start earning more, they
often switch from inferior to normal goods. Here, Neha used to buy budget clothes or
regular groceries. But now, with more money in her pocket, she’s opting for the
premium options instead. It’s like moving up the ladder in life.

>Impact on Luxury Goods

Lastly, we have luxury goods. These are high-end items that people buy more of as
their income increases, sometimes even more than normal goods. The demand for
luxury goods can increase significantly with income rise because they often come
with a status symbol, these aspiration include in the so called “Self-esteem Needs”.
For Neha, the high-end fashion brands and perhaps even the gym membership fall
into this category. It’s not just about utility, but also about prestige and lifestyle.

Why Neha’s Colleagues Choose Differently

But then, why do Neha’s colleagues stick to budget-friendly brands despite their
higher income? Well, this is where personal preferences and financial goals come into
play. Some people prefer saving for the future, investing their money, or spending on
experiences rather than material [Link] could also mean they are planning for an
early retierment in there life,as this becoming a trend now. For them, the satisfaction
of financial security or future benefits has more value than the immediate pleasure of
spending on luxury commodities.

Conclusion

In conclusion, Neha’s decision to upgrade her lifestyle is a classic case of the income
effect in action. Her increased income allows her to indulge in normal and luxury
goods, enhancing her quality of life. But as her colleagues shows, how one chooses to
spend their increased income can vary widely based on individual preferences,
priorities, and long-term goals. It’s all about what makes you feel secure and happy in
life, whether it’s a new dress or a bigger savings account. In the end, it’s all about
finding the right balance that suits your personal goals and aspirations.