Dse 2008 pls help

[SoniaKapoor]

[Gayyam]

Here we have to use the chain base price index.

The first step in this price index is to calculate a factor index using the previous year as the base year. So, for example the factor for 2003 would be - "Cost of consuming the 2002 bundle at 2003 prices / Cost of consuming the 2002 bundle at 2002 prices".
The next step is to multiply this factor with the index value at 2002.

For eg. to calculate the indices -
          Index
2000 - 100 (base year assumption)

2001 - (871*320 + 199*767)/(871*202 + 199*577) = 1.483...the factor.
       - Therefore, the index=1.483*100=148.3
2002 - (706*311 + 179*884)/(706*320 + 179*767) = 1.040167...the factor
       - Therefore, the index=1.040167*148.3 = 154.2

Similarly, you'll get the factor for 2003 as 0.94 and the index for 2003 as 144.9.

Hope this helped!

[SoniaKapoor]

Thanx Gayyam. :)

Also could u xplain quest 1 of same paper,2008

[Gayyam]

This, I did not know much about. But I just tried to search what it was and the wiki article lists all the properties of price indices.

http://en.wikipedia.org/wiki/Price_index#Index_number_theory

Could you solve q43 of the same paper? I have been stuck on it for an hour. :(

[SoniaKapoor]

Thank You

43. For this just maximise the utility fn such that pC=wL
Now, C=wLs/p
put this in utility function and solve for Ls . You will get it.

[Gayyam]

I tried the same.

I got MRS = (dU/dC)/(dU/dLs) = P/W. Along with C=W*Ls/P, I got (b) as the answer, but the answer key says that the answer is (a).

I'm confused! Did you get (a) too? Then I might have committed an error.

[The Villain]

Sonia , Gayyam even i think the answer is option b.Also if u solve the next quest then 43 a answer doesn't satisfy it. And i guess Sonia's approach is correct . I did in the same way. I maybe wrong but check out guys.

[Akshay Jain]

[Gayyam]

Thank you Akshay! :)
Abhi samajh aaya, itna dimaag lagane ke baad.