QUESTION: 57

Which of the following is definition of elasticity of demand in microeconomics?

The percentage change in the quantity demanded divided by the percentage change in income
The percentage change in price of a good divided by the percentage change in the quantity demanded of that good.
The percentage change in the quantity demanded of a good divided by the percentage change in the price of that good
The percentage change in income divided by the percentage change in the quantity demanded

Answer(s): C

Explanation:

Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor:

The price of a product can be described as being elastic if a small change in price leads to a big change in demand.
The price of a product can be described as being inelastic if a big change in price leads to a small change in demand.
The formulae of elasticity of demand is known as the following:

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QUESTION: 58

Which of the following are behaviours that builds trust between the buyer and the supplier in business relationship? Select TWO that apply.

Conducting transparent procurement process
Over-inflated contingency funds
Allowing supplier to involve in early product development
Commercial espionage
Tendency to blame other party

Answer(s): A,C

Explanation:

Trust-building behaviours are as following:
Joint-effort issue resolution
Open sharing of information
Open and honest discussion on root cause of failures
Joint planning focusing on value for money and risk sharing Commercial transparency and co-proposition of cost reduction and service improvement programmes
Joint recognition and celebration of successes

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QUESTION: 59

Which of the following is categorised as fixed cost?

Additional pallet hires due to higher demand in year-end season
Land rental paid in advance
Governments taxes
Raw materials for next year production

Answer(s): B

Explanation:

An organisation's expense can be categorised into three groups:

Fixed Costs costs that do not change with output.
Variable Costs costs that vary in direct proportion to output. Semi-variable costs costs that are a combination of the above, with both a fixed and variable element.
Among the four options:
"Land rental paid in advance": This is fixed cost. The rental won't increase when the production increases.
"Additional pallet hires due to higher demand in year-end season": This can be identified as semi- variable cost (or step cost).
"Governments taxes": The taxes are often levied by a percentage of income or revenue. Therefore, it is variable
"Raw materials for next year production": This is obviously variable cost.

Reference:

CIPS study guide page 79-84
Study tips: Fixed variable and semi-variable costs - AAT Comment

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QUESTION: 60

Which of the following are effective approaches when procurement professionals negotiate with monopoly suppliers?
1. Delaying payment with monopoly suppliers as long as possible to increase bargaining power
2. Setting up stronger BATNA
3. Engaging in the negotiation with a distributive approach
4. Eliminating requirements in the specification that prioritises monopoly suppliers

1 and 4 only
3 and 4 only
2 and 3 only
2 and 4 only

Answer(s): D

Explanation:

In most commercial negotiations with monopolistic organisations, one can expect that in general they will have far greater bargaining power - you will need them more than they need you. There BATNA is stronger in the short run, but over time their power can be challenged effectively.

Ways of dealing with monopoly suppliers include the following:
Making yourself an attractive buyer
Seeking out alternatives / substitutes in a private or public manner Designing out the requirement that forces you to go to the monopoly suppliers, or seek to make the product, or threaten to make it yourself if feasible
Lobbying government or campaigning, as part of an industry or trade body, for a reduction in barriers to entry that support the monopoly

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QUESTION: 57

Explanation:

QUESTION: 58

Explanation:

QUESTION: 59

Explanation:

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QUESTION: 60

Explanation: