MEC

MASTER OF ARTS
(ECONOMICS)

ASSIGNMENTS 2015-16
First Year Courses
(For July 2015 and January 2016 Sessions)

School of Social Sciences

Indira Gandhi National Open University
Maidan Garhi, New Delhi-110 068

Master of Arts (Economics)

(TMA)
(2015-16)

Dear Student,
As explained in the programme guide for MEC, assignments carry 30 per cent weightage
in a course and it is mandatory that you have to secure at least 40 per cent marks in
assignments to complete a course successfully. Note that you have to submit the
assignments before appearing in Term End Examination of a course.
Before attempting the assignments please read the instructions provided in the
programme guide sent to you separately. In this booklet we have included the
assignments for all the courses pertaining to the second year. In each course there is a
Tutor Marked Assignment (TMA). You have to do the assignment for those courses for
which you have registered. Do remember that you have to prepare and submit the
assignments separately for each course. Make sure that you submit the assignments well
in time for those courses in which you plan to appear in the Term End Examination.

Submission
For July 2015 session, you need to submit the assignments by March 31, 2016, and for
January 2016 session by September 30, 2016 for being eligible to appear in the termend examination. Assignments should be submitted to the Coordinator of your Study
Centre. Obtain a receipt from the Study Centre towards submission.

MEC-001: MICRO ECONOMIC THEORY

Assignment (TMA)
Course Code: MEC-001
Asst. Code: MEC-001/TMA/2015-16
Total Marks: 100

Section - A
Answer all the questions from this section.

1.

220=40

a) Consider a two person, two commodity pure exchange economy, with:



U  q q, U  q  q 
q q   q and q q   q 
Derive the contract curve as an implicit function of q and q.
What condition on the coefficients  and will ensure that the contract curve is
a straight line?
b) Explain the basic tenets of Rawls theory of justice.
2.

Consider the market for used cars. There are 100 cars for sale; half of them are bad
while the others are good. The owner of a bad car is willing to sell it for any price above
Rupees 400 but the owner of a good car is only willing to sell it for at least Rupees
1000. The bad cars are worth Rupees 600 to buyers, and some are worth Rupees 1200 to
them.
a) At a Pareto efficient allocation which car will be sold?
b) If buyers cannot observe the quality of the car for sale, how much would they
be willing to pay for a car?
c) Which cars will be sold in equilibrium in this market?
d) Suppose that the fraction  of the cars in the market is good. If buyer still
cannot observe the quality, how large must  is for cars to be sold in equilibrium?
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Section - B
Answer all the questions from this section.
a)

512=60

Define Nash equilibrium and explain with the help of the game
Prisoners Dilemma.

b)

Provide an example of a game with multiple Nash equilibrium.

c)

Find all the Nash equilibrium of the following game:

Player 2

Player1

3.

Left

Right

Up

(5,4)

(1,3)

Down

(4,1)

(2,2)

a) What do you mean by a pure public good?

b) There are only two individuals A and B in an economy. Their respective
marginal valuation curves for a public good, x, are given by MVA = 100-2x and
MVB = 25-x. The marginal cost of providing the public good is given by MC = 100 +
2x. Find the socially efficient quality of public goods.

4.

a)

Assume that there are four firms supplying a homogenous product. They have
identical cost functions given by C (Q) = 40 Q. If the demand curve for the
industry is given by
= 100-Q
find the equilibrium industry output if the producers are Cournot competitors.
What would be the resultant market price? What are the profits of each firm?

b)

How do you explain the prevalence of high wage rate along with unemployment in
an economy, using the efficiency wage model?
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5.

a) Rita faces the choice problem between two gambles. In gamble one, she wins
200 if a coin comes up head and loses 100 if the coin comes up tail. In
gamble two, she wins 2,0000 if coin comes up head and loses 10,000 if coin
comes tail. Assuming her initial wealth ) is 10,000 find:
i) If a risk neutral Rita would accept either, both or neither of the gambles.
ii) What would be her decision on the gambles given her utility function U w ?
iii) Compare and explain your results in (i) and (ii).
b) A consumers utility function is given as
U (x, y)  In5x 2y 6

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Where x and y are two goods of consumption.

i) Find the indirect utility function of the consumer.
ii) Examine if Roys law is satisfied by the consumers demand function for y.
iii) Find the expenditure function of the consumer e (p, u) where price of
x = 1 and price of y = p.
iv) Find the Hicksian demand function hy(p,u) for commodity y, where the price of x
is 1 and the price of y is p.

6.

Write short notes on the following:

i) Envelope theorem
ii) Compensation principle and Kaldor-Hicks criteria
iii) Independence axiom
iv) Hidden information
v) Actuarially Fair Premium

MEC-002: MACROECONOMIC ANALYSIS

Assignment (TMA)
Course Code: MEC-002
Assignment Code: MEC-002/AST/2015-16
Maximum Marks: 100
Note: Answer all the questions. While questions in Section A carry 20 marks each, those in
Section B carry 12 marks each.
Section - A
1.

In the context of neoclassical growth model, what is meant by golden rule steady state? In
what respect is it different from the steady state defined by Solow? Is the golden rule
steady state a stable condition? Explain with the help of appropriate diagrams.

2.

Consider the central planners problem in the Ramsey model. Derive the conditions for
modified golden rule. Interpret the equation with the help of phase diagram.

Section - B
3.

Discuss the implications of downward sloping Phillips curve. Why could the Phillips
curve be a vertical straight line in the long run?

4.

What are the major issues on which Lucas criticizes the Keynesian model? How relevant
are these issues in the present scenario?

5.

Bring out the main features of real business cycle (RBC) model.

6.

Bring out the salient features of overlapping generations (OLG) model. Explain why
there could dynamic inefficiency in an economy according to the OLG model.

7.

Write short notes on the following.

a) Ineffectiveness of monetary policy under fixed exchange rate
b) Permanent income hypothesis

MEC-003: QUANTITATIVE METHODS

Assignment (TMA)
Course Code: MEC-003
Asst. Code: MEC-003/TMA/2015-16
Total Marks: 100

Section - A
Answer all the questions from this section.
1.

220=40

a) A competitive firm has the following production function:

:  ;(<)  400< 60<  6 6< ?
Where y = output, x = input. The firm faces an output price of P = 10 and an input
price of W = 5440.
i) Write a profit function of this firm in terms of output and input prices and the
input level.
ii) What is the profit maximizing level of input for this firm? Verify that the input
level you choose is the profit maximizing point.
iii) Find the marginal product (MPx) of the variable input.
iv) Verify that P(MPx) = W at the profit maximizing input level.
b) What economics interpretation would be you attribute to the method of finding the
time-path using a difference equation? Explain your answer with the help of the
Cobweb model.

2.

a) What is Bayes theorem? Explain how you would make use of the results of this
theorem to derive the law of total probability.
b) Define the standard error of a statistic. Explain how it is helpful in testing of
hypothesis and decision making.

Section - B
Answer all the questions from this section.
3.

512=60

a) Consider the following national income determination model:

Y =C + I + G
C = a + b (Y-T)
T = d + ty
Where
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Y = National income
C = Consumption expenditure
T = Tax collection

If you are given that Y, C and T are endogenous variables; I and G are exogenous
variables and t is the income tax rate, using Cramers rule solve the model for
endogenous variables.

b) Solve the equation

4.

@A
@B

B 8 CA 8
BA

a) Explain the relevant considerations of making a choice between one-tailed and

two-tailed tests. How would you determine the level of significance in the as above
tests?
b) The demand curve for a consumer is P d =

D
E

d and b are constants. Find the price

elasticity of demand.

C) Find

@A

when:

@B

i) y = log(F B 3)


ii) y = B 8
5.

HI8

a) Given the supply and demand for the cobweb model as:
QKL  6P CN
LC
Q OL  19 6 6PL
Find the inter temporal equailibrium price and determine whether the equilibrium
is stable.
b) Establish the stability condition of Samuelsons multiplier-accelerator interaction
model.

c) Explain the importance of duality of linear programming in economic analysis.

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6.

a) Write short notes on the following:

i) Monotone function
ii) Eigen value and Eigen vector
iii) Rank of a matrix
b) Given the rate of investment is I(t) = 12 t/? , where t is time. Suppose the initial
capital stock, K0 is 25.
i) Find the time path of capital stock
ii) Find the amount of capital accumulation during the time intervals [0, 1] and [1, 3].

7.

a) If < , < , <T is random sample from a normal population N(, 1.) Show that


<U  V TZ[ XY is unbiased estimator of  1.

b) Derive the least squares normal equation for fitting a parabolic curve. What change
will be necessary if there was a change of origin for the X data only?

c) Marks obtained by 12 students in college test(x) and university test (y) are as
follows:

41

45

50

68

47

77

90

100 80

100 40

43

60

63

60

48

85

56

53

91

98

43

74

65

What is your estimate of the marks students would have got in the university test, if
he got 60 in the college test but was ill for the university test?

MEC-004: ECONOMICS OF GROWTH AND DEVELOPMENT

Assignment (TMA)
Course Code: MEC-004
Asst. Code: MEC-004/AST/2015-2016
Total Marks: 100
Note: Answer all the questions. While questions in Section A carry 20 marks each (to be
answered in about 500 words each) those in Section B carry 12 marks each (to be answered
in about 300 words each). In the case of numerical questions word limits do not apply.

Section-A
1)

Critically examine Schumpeters theory of capitalist development through innovations.

2)

What is meant by multi-sector growth models? Explain their role in economic planning.
Explain in brief the basic structure of a simple multi-sector growth model.
Section-B

3)

Bring out the role of social norms and the community in economic development.

4)

What are the properties that a suitable measure of income inequality should possess?
Explain Lorenz curve and Gini coefficient.

5)

Describe the Lewis model of economic development. How does it differ from Boekes
theory of dualism?

6)

Highlight the salient features of the Ramsey model.

7)

Explain the major reasons for market failure.

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MEC-005/105: INDIAN ECONOMIC POLICY

Assignment (TMA)
Course Code: MEC-005/105
Assignment Code: MEC-005/105/AST/2015-16
Maximum Marks: 100
Note: Answer all the questions. While questions in Section A carry 20 marks each (to be
answered in about 700 words each) those in Section B carry 12 marks each (to be answered
in about 500 words each).
Section - A
1. At present stage of economic development, Indias work force holds the key to launch a
sustained attack on poverty Explain
2. Indian economic environment has undergone dramatic changes with a shift in development
strategy. Comment.
Section - B
3. Examine the rate and pattern of industrial growth during the last two decades. What
suggestions would you like to make towards rapid industrial growth?
4. Do you agree that the existing institutional structure in India have not led to good governance
outcome? Give reasons in support of your answer.
5. What do you mean by fiscal imbalance? Critically examine the various steps taken by the
Central Govt. to correct this situation.
6. Do you think that planning in India has been successful? Give reasons in support of your
answer.
7. Evaluate the Export Import Policy 2009-14.
or
Distinguish between labour force and work force. State the various dimensions of
deterioration in the quality of employment in India.

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