Problem 1: If demand of MBA graduates increases in Bangladesh, then what happens to their equilibrium price (or salary)?

Px
Salary

PE PE

E E S D D

QE QE

QDx/ QSx

Quantity demanded/supplied

Figure: Increase in demand of MBA Graduates The downward sloped curve DD is demand curve of MBA Graduates, the upward sloped curve SS is Supply curve of MBA graduates. Market equilibrium exists at point E. At E, for equilibrium price PE, quantity demanded and supplied are same which is QE. If the demand of MBA graduates increase, the demand curve of MBA graduates shifts to the right. The supply curve is unchanged. The new equilibrium is at E point now. This shift indicates that the quantity of MBA Graduates demanded is higher at each price. At old equilibrium price PE, there is now excess demand for MBA graduates and this shortage induces firms to raise the price. As the figure above shows, the increase in demand raises the equilibrium price from PE to PE and the equilibrium quantity from QE to QE. In other words, ceteris paribus, an increase in demand will increase the equilibrium Salary of MBA graduates.

Problem 2: If both the demand & the supply of MBA graduates increase in Bangladesh then what would happen to their equilibrium prices/ salaries. Ceteris Paribus, the overall effect depends on the relative increase in demand and supply. Three possible outcomes might results depending on the relative size of the demand and supply shifts. 1. Demand increases substantially but supply increases just a little 2. Supply increases substantially but demand increases just a little 3. Both demand and supply increase in substantially / little or in the same size. Demand increases substantially but supply increases just a little: Px
Salary D D S S

PE PE
S S E

E D D

QE

QE

QDx/QSx

Quantity demanded/supplied of MBA Graduates

As demand increases substantially, the demand curve shifts substantially to the right (from DD to DD) and as the supply increases just a little, the supply curve shifts a little to the right (from SS to SS). Due to these changes, market equilibrium changes its position from E to E. Here, both equilibrium Price and equilibrium quantity increases. So, if demand of MBA Graduates increases at a faster rate than the rate of increase in supply of MBA Graduates, then ,in this case, the equilibrium Salary will INCREASE.

Supply increases substantially but demand increases just a little

Px
Salary

S S

PE PE
S S

E D

QE

QE

QDx/QSx

Quantity demanded/supplied of MBA Graduates

As supply increases substantially, the supply curve shifts substantially to the right (from SS to SS) and as the demand increases just a little, the demand curve shifts a little to the right (from DD to DD). Due to these changes, market equilibrium changes its position from E to E. Here, equilibrium Price decreases but equilibrium quantity increases. So, if supply of MBA Graduates increases at a faster rate than the rate of demand increase in of MBA Graduates, then, in this case, the equilibrium Salary will DECREASE.

Both demand and supply increase in the same size

Px
Salary

S S

PE/ PE
S S

E D

QE

QE

QDx/QSx

Quantity demanded/supplied of MBA Graduates

As demand increases, the demand curve shifts to the right (from DD to DD) and as the supply increases in the same size of demand, the supply curve shifts in the same amount as demand curve to the right (from SS to SS). Due to these changes, market equilibrium changes its position from E to E. Here, both equilibrium Price remain same and but equilibrium quantity increases. So, if demand and supply of MBA Graduates increases at the same rate, then ,in this case, the equilibrium Salary will remain unchanged.

Problem 3: What factors would increase or decrease the demand of MBA graduates in Bangladesh? Explain using figures & real life examples. There are several factors which could increase/decrease the demand for MBA graduates, some of which are outlined below: a) Economic growth rate in Bangladesh if the economic growth rate increases, the number of business firm increases in the country. As MBA graduates are better equipped with business knowledge than other graduates, the demand of MBA graduates will increase to the recruiters. b) Income: When peoples real incomes rise, they will buy more goods and services, ceteris paribus. More labour may be required to produce these goods and services, and some of this increased demand for labour may constitute a rise in the demand for MBA graduates, ceteris paribus.

c) Salary of other degree holders: If the Salary of other graduates increases, then the demand for MBA Graduates will increase. If the Salary of other graduates dercrease, then demand for MBA Graduates will decrease also.

d) Preference: Some recruiters prefer MBA Graduates over other graduates. This preference increases the demand of MBA graduates. e) Performance of MBA graduates: If the performance of MBA Graduates is exceptionally good, then the employers would like to hire MBA Graduates resulting increase in demand.

Px
Salary

P
x

PE PE

E E S D

Salary

PE
D

E S D

PE

QE QE

QDx/ QSx

QE QE

QDx/ QSx

Quantity demanded/supplied

Quantity demanded/supplied

Figure: Increase in demand of MBA Graduates

Figure: Decrease in demand of MBA Graduates

Problem 4: What factors might increase/decrease the supply of MBA graduates in Bangladesh? Explain using figures & real life examples. There are several factors which could increase/decrease the supply of MBA graduates, some of which are outlined below: a) Population: If the population increases, and more students go on to study MBA, then the supply of MBA graduates may increase, ceteris paribus.

b) Future expectation of income of MBA graduates: The future expectation of salary of MBA graduates can change the quantity demanded. Since in recent past the salary of MBA graduates was higher compared to other disciplines, more students went to study MBA. Expectation of increase in salary shifts the demand curve rightwards, ceteris paribus; and vice versa.

c) Number of providers: If the number of providers of MBA graduates increases, its supply will increase. Since the number of universities which are offering MBA degrees is increasing at an alarming rate the Supply is increasing. If the government regulates some strong regulations to maintain the quality of education provided by these universities some of the providers may leave the business. With the exit of providers, the supply would decrease.

d) Cost of achieving an MBA degree: Students are likely to demand MBA degrees if the benefits they expect to derive from it are greater than the costs they will incur in its acquisition. Thus if the cost of achieving an MBA degree decreases then the supply increases, ceteris paribus; and vice versa.

S S

Px
Salary

Px
Salary

PE PE PE
S S QE E E D

PE

E S S QE D

QE

QDx/QSx

QE

QDx/QSx

Quantity demanded/supplied of MBA Graduates

Quantity demanded/supplied of MBA Graduates

Figure: Increase in supply of MBA Graduates

Figure: Decrease in supply of MBA Graduates