dse 2012 ECOTRICS

[abc]

QUESTION 31........... WHAT WIIL BE THE ANSWER...... AND WHY......?????

[Prerna]

Hi abc,

Consider x1 = 3 and x2 = 0 then W1 = 3 and W2 = 0
Now lets make a progressive transfer from individual 1 to individual 2, x1' = 2 and x2' = 1 (total income in the economy should remain the same)
Then W1' = 3 and W2' = 2

As described the measure is 'good' if a progressive transfer improves social welfare. Thus W1 is not a good measure and only W2 is.

[abc]

THANXXXXX PRERNA BUT I ASKED Q.NO.31

[Prerna]

Hi abc,

Apologies for the error on my part.

Que 31. Just solve the normal equation i.e. Min ∑(Yi - βXi)^2 w.r.t β
 
You will get βhat = (∑XiYi)/(∑Xi^2)  ≠ βhat in case of OLS with intercept

[abc]

THANXXXXXX.......... NOW ITS CLEAR TO ME......