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LE.S/IS.S, Examination, 2024 SGSE-P-GNM
GENERAL ECONOMICS
PAPER—I
Time Allowed : Three Hours | Maximum Marks : 200
QUESTION PAPER SPECIFIC INSTRUCTIONS
Please read each of the following instructions carefully
>
before attempting questions
There are THIRTEEN questions divided under THREE Sections.
The ONLY question in Section—A is compulsory.
In Section—B, FIVE out of SEVEN questions are to be attempted.
In Section—C, THREE out of FIVE questions are to be attempted.
Candidates should attempt questions/parts as per the instructions given in the Sections.
The number of marks carried by a question/part is indicated against it.
Candidates are required to write clear, legible and concise answers.
Attempts of questions shall be counted in sequential order. Unless struck off, attempt of
a question shall be counted even if attempted partly.
Any page or portion of the page left blank in the Question-cum-Answer (QCA) Booklet
must be clearly struck off.
Answers must be written in ENGLISH only.
SGSE-P-GNM/74 1 [-P:T.O..
1. Answer all the following seven parts :
Answer any five of the following seven questions :
2.
SECTION—A
( Compulsory Section )
(0) If the demand function is P=(4-0-5q)?, for what value of ૦ will the price
elasticity of demand be unity?
(b) If a production function is homogeneous of degree 1, following CRS, show
that the marginal productivity and average productivity functions are
independent of the absolute amounts of the inputs, but depend upon the
input ratios.
(c) Explain the ‘peak load pricing’ with reference to power sector. In what way
will it increase economic efficiency?
(d) Distinguish between Ricardo and Kalecki theories of distribution.
(e) Define Hicks-Kaldor compensation principle. What are the main criticisms
against this compensation principle?
0 Show that the production function Q = log (81% 82) is concave for ੩110), 02 > 0.
(g) Specify an orthogonal factor model by mentioning the underlying assumptions
of the model.
SECTION—B
(a) In a two-commodity framework, what will be the shape of the indifference
curve when—
(0 one commodity is ‘bad’;
8 one commodity is ‘neutral’ 7
Explain your answer.
(b) State and prove the Slutsky’s theorem. Derive the demand curve for a Giffen
good by using this theorem.
SGSE-P-GNM/74 2
57-35
18x5=90
ಶರನ (a)
धि
4. (a)
(b)
5. (a)
Write down the major characteristics of a translog production function.
In what ways is this production function different from Cobb-Douglas
production function? 10
Suppose that the production function of a firm is given as Q = ALS 2/3,
(i) Find out the returns to scale of this production function.
(ii) Is the production process labour-intensive?
(iii) If the prices of L and K are ₹20 and #100 respectively and the firm
incurs total cost ₹ 1,050, what will be the optimal combination of
Land K? 8
Formulate the dual form of the following problem relating to production by
a rational firm :
Maximize 7 = 02%
subject to 4८ < 9
and x20
where
7 is the total profit
p’ is the row vector of order 1x2 of output prices
x is the column vector of order 2x1 of output produced
A is the coefficient matrix of order 2x2
Give economic interpretations of the dual problem. Give a Lagrange’s multiplier
interpretation to the optimal values of the dual choice variables. 4+3+3=10
Consider the following utility function :
= 042
Derive the compensated demand function for .ہو Show that this demand
curve is always negatively sloped. 5+3=8
Price index can be defined as a weighted average of price relatives. Find out
the formulae for the Laspeyres and Paasche price index by taking appropriate
weights. Write down the merits and demerits of these indices. ৪
SGSE-P-GNM/74 3 [ P.T.O.
(b) Suppose that you have got the following estimated results in estimating
a relationship between Y and X in a dynamic framework :
ந = 2 : 7 +0 * 6×£ 40-05]
(0.392) (0-004)
R? =0-989, DW =0-06
[The figures in parentheses show standard errors]
In your estimation even R? is very high, the results are useless. Explain
why this estimation is useless.
(c) “Univariate regression analysis is more meaningful with time series data
than with cross-section data.” Discuss.
6. (a) “Multiple linear regression model can consider the ceteris paribus effect,
while simple linear regression model fails to do it.” Explain the validity of this
statement.
(b) In a two-regressor multiple linear regression model Y; = 30 +B, ઝી; +B2Xo; 1६)
the estimated coefficients are
8, = 5522 ¬ 52૪512
ಸತು ಜಸ ಡಿ
51522 - 5122
52૪511 ¬ 5521
82 =
511522 - 5122
where
Siy گاج -2))0; -?)
அட - 5 0)"
S ik = 4.1 ¬ 20%)
How do you interpret 81 and 92?
(c) Write down the desirable properties of a good index of inequality. Discuss
whether Gini index satisfies all the desirable properties.
SGSE-P-GNM/74 4
धि
8. (a)
(৮)
Answer any three of the following five questions :
9. (a)
(৮)
رط
State Euler’s theorem. Use this theorem to explain product exhaustion
problem.
Explain how factor prices are determined under bilateral monopoly.
What do you mean by market failure? Explain it with a real world example.
(0 Write down the behavioural assumptions on Walrasian and Marshallian
stability analysis.
(છ Derive the conditions for Walrasian and Marshallian stability.
(1) Show that these two conditions cannot be fulfilled together when the
10
demand and supply curve both have negative slope. 3+4+3=10
SECTION—C
Both the marginal utility approach and the indifference curve approach
yield the same equilibrium position for a rational consumer. Discuss the
relative advantages of the indifference curve approach over the marginal
utility approach.
Show that demand has unitary price elastic if the price consumption curve
is horizontal.
Suppose that a consumer in a two-commodity (X,Y) world has linear
indifference curve with a slope equal to ->. Find out the equilibrium
consumption when prices for both commodities equal to 2 (Py = Py =2) and
income level of the consumer is ₹ 2,000. How does equilibrium bundle
change when Py =1 and 2. =4 with the same level of income?
[Assume that the consumer spends all income on these two commodities only]
25x3=75
10
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10. (a) Suppose that the sample observations on price (X) and supply (Y) of
a commodity reveal that Y is increasing faster than X implying the
ˆ non-linear relationship between X and Y. How do you specify a linear
regression model to estimate this supply function? Give reasons. Write down
the economic interpretation of the regression coefficient. What are the
major components involved in the random error of this regression model? 15
(ಗ) In a linear regression model Y = 30 + 0178 + 1/, the variance of the regression
coefficient 81 varies inversely with the variance of X. What are the implications
of this result? If the sample mean X is zero, show that the cov(Bo, મિ) ௨0,
where Bo and મિ are the OLS estimates of By and 0]. 10
11. (a) Show that in finding the AM of 100 readings on temperature, it does not
matter whether it is measured in Centigrade or Fahrenheit scale, but it
matters in finding the GM. 10
(b) Show that correlation coefficient between two variables X and Y can be
interpreted as the proportion of the total variability of Y which is accounted
for by its linear regression on X. 7
(c) Consider the following two-sector economy :
Sectors | 1 | | on | Final consumption
| 1 | 100 100 50
| on | 120 | 80 | [৪ |
Calculate the Leontief inverse of this hypothetical two-sector economy after
formulating the open Leontief model. Interpret the coefficients of this matrix
properly. If the final consumption demand changes to 100 units for sector I,
and 50 units for sector II, what would be the new production levels in sector I
and sector II ? 8
12. (a) Show the conditions that ensure efficient distribution of a given combination
of products between two consumers. Would the same conditions ensure
maximum equity? 15
(b) Compare the social choice theories of Ronald Coase and Amartya Sen. 10
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13. (a) Explain the following pricing rules of public sector enterprises :
() Pricing of public utility services
(ii) Marginal cost pricing rule
(ii) No-profit no-loss policy
(iv) Profit price policy 10
(b) Show that the long-run average cost curve is an envelope of the short-run
average cost curves. What will be the shape of the long-run average cost
curve under increasing returns to scale? Explain your answer. 15
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SGSE-P-GNM/74 7 SB24—6240
