Exam Details
| Subject | general economics | |
| Paper | paper 1 | |
| Exam / Course | indian economic service and indian statistical service examination (ies/iss) | |
| Department | ||
| Organization | union public service commission | |
| Position | ||
| Exam Date | 2017 | |
| City, State | central government, |
Question Paper
Q1. Why do we need the constancy assumption of marginal utility of money in Cardinal Utility Analysis? Justify your answer.
Define the method of Compensating Variation of income and the method of Cost Difference.Why is the latter method superior to the former one?
Distinguish between laws of variable proportions and laws of returns to scale. Find out the elasticity of substitution in the case of fixed coefficient type production function.
Find out the cost elasticity of output at the minimum point of the overage cost curve in the short-run.
Define peak-load pricing. How does it differ from third degree price discrimination ?Analyse graphically.
Consider the equilibrium of a firm under perfect competition. Find out the condition for normal profit, or super normal profit or loss (whichever is applicable for the firm) without using the average cost curve. Explain only diagrammatically.
Explain the concept of divergence in the context of social and private welfare.
Q2. How can you measure the price elasticity of demand at any point on a straight line demand curve
Compare between price elasticity at a given price and also at a given quantity for a set of parallel demand functions.
Q3. Write down the form of CES production function and interpret its parameters show that the Cobb-Douglas production function is a special case of CES function.
Find out the elasticity of substitution of the CES production function.
Q4. What do you mean by price discrimination? Under what circumstances is price discrimination profitable Trace out the equilibrium situation under price discrimination.
Q5. State and explain the Kaldor-Hicks compensation principle. How does Scitovsky provide an improvement of Kaldor-Hicks compensation principle?
Q6. State, prove and give an economic interpretation of Euler's theorem. Show that at the minimum point of the long-run average cost, the total product is exhausted.
Q7.(a) Consider two regression equations of y on x and x on y. Show that the arithmetic mean of two regression coefficients is greater than the correlation coefficient, provided the correlation coefficient is positive.
Under which condition do the two regression lines coincide
In a bivariate distribution,a researcher gets two lines of regression as
2x-y+1
3x-2y+7 0
Identify the true regression lines and find the mean of x and y.
Q8. If a single buyer focuses on a single seller, what are the outcomes likely to appear? Do you think that the exploitation of labour will emerge? Justify in favour of your arguments. Find out the equilibrium condition of a firm in the in both the product and input market,
Q9.(a)Let the demand function for a good be
src='./qimages/7965-9a.jpg'>
where q the quantity demanded, p the price per unit and y the income What do the parameters α and β imply and what is the sum of α and β interpret your result
Consider the utility function u log x1 x2 which is to be maximized subject to the budget constraint m p1x1 p2x2, where p1 and P2 are the prices per unit of the goods x1 and x2 respectively, and m is the income of the consumer. Derive the demand for x1 and x2 and interpret your results.
Given the demand function and total cost function of a perfectly competitive firm as p 32 c 8X p being price, c being cost and output. Find out the output, price, profit and total revenue corresponding to
maximization of total profit.
Q10. Describe the Leontief static open input-output model along with its assumptions.
State the Hawkins-Simon conditions and explain their economic meaning and significance.
Find out the total demand for industries 2 and 3 if the coefficient matrix A and the final demand vector B are as follows
src='./qimages/7965-10c.jpg'>
Q11.
What do you mean by multicollinearity
How does it affect the precision of estimates
Consider a simple model
src='./qimages/7965-11c.jpg'>
and the variables are in deviation form. The disturbance term u¡ satisfies all the classical assumptions. Suppose x2¡ and x3¡ are multicollinear.Should you drop either x2¡ or x3¡ to have precise estimates of the remaining parameters If so, under what condition are you permitted to do so
Q12. Explain the meaning of spurious regression.
How are the values of Durbin-Watson d statistic and R^2 indicative of spurious regression
Show that in the case of spurious regression between Yt and Xt. where both Yt and Xt are generated by random walks, the errors have a permanent effect; the variance of the errors is infinitely large. What should you interpret from your result?
src='./qimages/7965-12c.jpg'>
Ql3. Explain what do you mean by heteroscedasticity.
Given the model
src='./qimages/7965-13b.jpg'>
... find out the OLS and OLS variance of the regression slope.
Show that if takes the values
src='./qimages/7965-13c.jpg'>
Define the method of Compensating Variation of income and the method of Cost Difference.Why is the latter method superior to the former one?
Distinguish between laws of variable proportions and laws of returns to scale. Find out the elasticity of substitution in the case of fixed coefficient type production function.
Find out the cost elasticity of output at the minimum point of the overage cost curve in the short-run.
Define peak-load pricing. How does it differ from third degree price discrimination ?Analyse graphically.
Consider the equilibrium of a firm under perfect competition. Find out the condition for normal profit, or super normal profit or loss (whichever is applicable for the firm) without using the average cost curve. Explain only diagrammatically.
Explain the concept of divergence in the context of social and private welfare.
Q2. How can you measure the price elasticity of demand at any point on a straight line demand curve
Compare between price elasticity at a given price and also at a given quantity for a set of parallel demand functions.
Q3. Write down the form of CES production function and interpret its parameters show that the Cobb-Douglas production function is a special case of CES function.
Find out the elasticity of substitution of the CES production function.
Q4. What do you mean by price discrimination? Under what circumstances is price discrimination profitable Trace out the equilibrium situation under price discrimination.
Q5. State and explain the Kaldor-Hicks compensation principle. How does Scitovsky provide an improvement of Kaldor-Hicks compensation principle?
Q6. State, prove and give an economic interpretation of Euler's theorem. Show that at the minimum point of the long-run average cost, the total product is exhausted.
Q7.(a) Consider two regression equations of y on x and x on y. Show that the arithmetic mean of two regression coefficients is greater than the correlation coefficient, provided the correlation coefficient is positive.
Under which condition do the two regression lines coincide
In a bivariate distribution,a researcher gets two lines of regression as
2x-y+1
3x-2y+7 0
Identify the true regression lines and find the mean of x and y.
Q8. If a single buyer focuses on a single seller, what are the outcomes likely to appear? Do you think that the exploitation of labour will emerge? Justify in favour of your arguments. Find out the equilibrium condition of a firm in the in both the product and input market,
Q9.(a)Let the demand function for a good be
src='./qimages/7965-9a.jpg'>
where q the quantity demanded, p the price per unit and y the income What do the parameters α and β imply and what is the sum of α and β interpret your result
Consider the utility function u log x1 x2 which is to be maximized subject to the budget constraint m p1x1 p2x2, where p1 and P2 are the prices per unit of the goods x1 and x2 respectively, and m is the income of the consumer. Derive the demand for x1 and x2 and interpret your results.
Given the demand function and total cost function of a perfectly competitive firm as p 32 c 8X p being price, c being cost and output. Find out the output, price, profit and total revenue corresponding to
maximization of total profit.
Q10. Describe the Leontief static open input-output model along with its assumptions.
State the Hawkins-Simon conditions and explain their economic meaning and significance.
Find out the total demand for industries 2 and 3 if the coefficient matrix A and the final demand vector B are as follows
src='./qimages/7965-10c.jpg'>
Q11.
What do you mean by multicollinearity
How does it affect the precision of estimates
Consider a simple model
src='./qimages/7965-11c.jpg'>
and the variables are in deviation form. The disturbance term u¡ satisfies all the classical assumptions. Suppose x2¡ and x3¡ are multicollinear.Should you drop either x2¡ or x3¡ to have precise estimates of the remaining parameters If so, under what condition are you permitted to do so
Q12. Explain the meaning of spurious regression.
How are the values of Durbin-Watson d statistic and R^2 indicative of spurious regression
Show that in the case of spurious regression between Yt and Xt. where both Yt and Xt are generated by random walks, the errors have a permanent effect; the variance of the errors is infinitely large. What should you interpret from your result?
src='./qimages/7965-12c.jpg'>
Ql3. Explain what do you mean by heteroscedasticity.
Given the model
src='./qimages/7965-13b.jpg'>
... find out the OLS and OLS variance of the regression slope.
Show that if takes the values
src='./qimages/7965-13c.jpg'>