ISI Sample Paper 2015 - Question 6

[soumen08]

Hi,

Here is the question



All I can see is that

dY/dG = dC/dG + 1

Im stuck from here. Any thoughts on how to work out this question?

[L]

Read Section 1.1 of attached paper, which gives the outline for how to solve part (a), though the analysis mentioned in paper has lesser variables. I got the idea, however, I am still not able to solve it. If you are able to solve after reading that section, please post the solution.ISI_2015_Q_6_hint.pdf 

[Anakin Skywalker]

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[L]

I think you misread the question. You need to prove that dY/dG belongs (0,1), its not less than 0 as you proved. You mistook when you f'(L)<0 on second page.
You actually proved dY/dG will be > 0. But, it will be difficult to prove that dY/dG < 1 by the way you solved. Even if dL/dG < 1 (taking W>P), still we can't say that dY/dG will be less than 1.

As I said earlier, read the paper (section 1.1) attached in previous post. It'll give some ideas about the problem.  

[Anakin Skywalker]

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[Anakin Skywalker]

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[Rajat]

Skywalker, could not follow the part where you have subtracted lambda*(Budget constraint) from Utility function.

What does that equation indicate ? Can you pls explain the rationale you are trying to show in the solution

[Anakin Skywalker]

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[Rajat]

Hey thanks skywalker. I was totally unaware of that  ! Is this not given in Varian . That is the only book I am following .. and I hope i am not missing out on other such concepts

[Anakin Skywalker]

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[Anakin Skywalker]

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[Rajat]

Ok.. thanks a lot !
Will do that

[kanv93]

@ Rajat / L : Can any one of you post the solution and the explanation.
I could not solve it and also skywalker's posts are missing.

Pls help me ASAP.

[Aashna]

Please post the solution again. all the skywalker's posts are missing