DSE 2011 Doubt

[Ayushya Kaul]

Question 42.

According to Amit sir's answer key, the answer is (a) 10.
But shouldn't it be (c) 2.5?

http://economicsentrance.weebly.com/uploads/1/1/0/5/1105777/2011-option-a.pdf

[duck]

Hi Ayushya.. :)

Just plot the IC. You'll see that if price ratio is less than 1/2 then, consumer would consume only "x" and no "y". In the given question, price ratio is 1/3 < 1/2 . Therefore, spends all his income on "x" i.e x=10 and y=0.

You can refer the following document for some help:
http://economicsentrance.weebly.com/uploads/1/1/0/5/1105777/notes_1.pdf

[Amit Goyal]

u(10, 0) =  10 > 7.5 = u(2.5, 2.5)  
Note that (10, 0) and (2.5, 2.5) are both affordable.

[Ayushya Kaul]

Thanks so much sir :)

[maahi]

sir utility fn is a min so u (0,10 ) = 0 ??

[Amit Goyal]

Utility is not min{x, y}, utility is min{x +2y, 2x + y}
Please read the question carefully.

[maahi]

ohh so sorry

[maahi]

 hi duck  :-)


"Just plot the IC. You'll see that if price ratio is less than 1/2 then, consumer would consume only "x" and no "y". In the given question, price ratio is 1/3 < 1/2 . Therefore, spends all his income on "x" i.e x=10 and y=0."

 i am unware of this method . can u please teach me  d complete working as in how we plot ics and then find price ratios ?

 also i couldn't understand sir's explanation from d doc.

also , can't we just equate x +2y= 2x +y and get x =y and substitute in Budget const to get d ans ? what is d diff b/w d two approaches ? using this approach we get d correct ans fr d previous ques .



also


Q 55 shouldn't ans be 2500 ??


Q50 what is d diff b/w option a ) and d )? why may be and not is ??



q 38  how will we include health care facilities in our model ? won't we use d dummy variable for this ?

[maahi]

q5 why not b ? i m nt aware of this rank and existence of soln concept . can u xplain ? q6 why not c ?

[Devika]

For Q55, you need to calculate the output per worker. 2500 is the steady state capital.

For Q50, in the first game, the best strategy for the row player is to not enter. In the second game, the pure strategy Nash equilibrium is 3,3. The pay off for the row player increases, while the pay off for the column player falls. So eliminating a strategy may be beneficial.

Q 5, if the rank of matrix A = rank of the augmented matrix, AB= No. of variables, then there exists a unique solution.

[maahi]

thank you devika .
what is augmented matrix ? AB= No. of variables whta is ab here ?

[duck]

Hi Maahi.. :)

Just Plot the IC in the usual way.
Assume certain value of "U" and then plot the level curves (indifference curves).