Micro Economics & Macro Economics DEC 2025
Micro Economics & Macro Economics
Dec 2025 Examination
Q1. A popular coffee brand, BrewBuzz, has introduced a loyalty program offering every 6th coffee free. At the same time, a new health study revealed that moderate coffee consumption boosts productivity and reduces stress. These developments have attracted new customers and encouraged existing ones to buy more coffee.
Based on the above scenario, apply your understanding to identify whether this scenario reflects a movement along the demand curve or a shift of the demand curve. Discuss the direction of the shift and how this change could influence BrewBuzz’s sales volumes and potential pricing strategy. (10 Marks)
Ans 1.
Introduction
In economics, understanding the difference between a movement along the demand curve and a shift of the demand curve is crucial for analyzing consumer behavior and market outcomes. A movement along the demand curve happens when price changes lead to different quantities demanded, while a shift occurs when non-price factors, such as consumer preferences, income levels, or external influences, alter demand at all price levels. In the case of BrewBuzz, both a loyalty program offering every 6th coffee free and new health findings highlighting the benefits of moderate coffee consumption influence consumer behavior beyond simple price variations. These factors reshape the demand dynamics by creating stronger incentives to buy coffee, suggesting a shift in the demand
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Q2(A). A premium coffee chain, “Bean Bliss,” recently increased the price of its signature latte by 20% due to rising operational costs. Following this, the chain observed varied changes in sales across different outlets. In metropolitan cities, the sales remained almost unchanged, while in smaller towns, there was a significant drop in demand. Interestingly, customers who were highly brand loyal continued purchasing despite the price hike, whereas price-sensitive customers shifted to local coffee shops.
Analyze the above scenario and identify how different determinants of elasticity of demand—such as availability of substitutes, level of income, brand loyalty, time frame, share in total expenditure, competitive nature of the industry, and preferences/habits—are influencing the elasticity of demand for “Bean Bliss” in different markets. Provide a detailed explanation linking each determinant to the observed customer behavior. (5 Marks)
Ans 2a.
Introduction
Elasticity of demand explains how quantity demanded responds to a price change. After Bean Bliss raised latte prices by 20%, demand reacted unevenly across locations and consumer segments, revealing how context-specific determinants shape elasticity. Metropolitan outlets saw stable sales, smaller towns experienced sharp declines, and brand-loyal buyers persisted while price-sensitive customers switched. These outcomes can be systematically explained by the availability of substitutes, income levels, brand loyalty, time horizon, budget share, industry competitiveness, and consumer preferences or
Q2(B) A consumer electronics company, TechNova, is preparing to launch a next-generation smart home device. With no reliable historical data available, the management is considering using a structured approach to gather forecasts from industry experts, researchers, and experienced marketers. The process involves several rounds of anonymous feedback, with each round refining the estimates until a consensus is reached.
Evaluate the above demand forecasting method being used in the given scenario, and the technique in detail. You are required to justify whether this method is the most appropriate choice for TechNova, providing well-reasoned arguments supported by the nature of the product, market uncertainty, and the decision-making needs of the company. (5 Marks)
Ans 2b.
Introduction
Launching a next-generation smart home device without historical data pushes TechNova toward judgment-based forecasting. The described process—sequential, anonymous rounds with iterative feedback toward convergence—is the Delphi method. It aggregates dispersed expertise from researchers, marketers, and industry specialists while mitigating dominance and groupthink. For an innovative product facing uncertain adoption curves, evolving standards, and ecosystem dependencies, Delphi can create a reasoned, consensus-
Micro Economics & Macro Economics DEC 2025Micro Economics & Macro Economics DEC 2025Micro Economics & Macro Economics DEC 2025Micro Economics & Macro Economics DEC 2025Micro Economics & Macro Economics DEC 2025Micro Economics & Macro Economics DEC 2025Micro Economics & Macro Economics DEC 2025Micro Economics & Macro Economics DEC 2025Micro Economics & Macro Economics DEC 2025