IEcoS General Economics Paper 1 Papers 1998

IEcoS General Economics Paper 1 1998


Attempt any TWO parts of the following question, in about 200 words each

  1. Answer the following questions

    1. Explain the revealed preference theory and point out its advantages over other theories. 30

    2. Define monopolistic competition. Show how equilibrium and output are determined in such a market in the long run. 30

    3. Explain the marginal productivity principle of factor pricing. Prove the proposition that the total product is just exhausted if each factor is paid its marginal product. 30

    4. Describe the relationship represented by the Philips curve and indicate its policy implications. 30


Attempt any Two of the following questions (Be precise and technical in your presentation).

  1. Show that no two indifference curves can intersect. Explain the following statement: The distance between any two indifference curves is immaterial; the only relevant issue is which curve is higher and which is lower. 25

  2. Show that the long-run average cost curve is the envelope of the short-run average cost curves. What is the shape of the long-run average cost curve with constant returns to scale? 25

  3. What is meant by oligopoly? In what respects is it different from of the forms of market? Show that oligopolies may face a kinked demand curve. 25

  4. Explain transactions demand for money. Show weather it is interest-elastic. 25


Attempt any TWO of the following questions (Be analytical and descriptive in your presentation).

  1. The real world witnesses neither pure monopoly nor pure competition: It is a world of imperfections. Explain the statements and describe the different forms of imperfect markets. 45

  2. Price mechanism generates an optimal allocation of resources if certain conditions are satisfied. Elucidate. How far can state intervention be useful in promoting optimality when these conditions are absent? 45

  3. Describe the fiscal and monetary policies of economic stabilization. Make a comparative analysis of their effectiveness in developed and developing economies. 45

  4. Write critical notes on any the of the following (3 × 15 = 45);

    1. Giffen Goods

    2. Hicks Effect of Price Change

    3. Public Utility Pricing

    4. liquidity Trap

    5. Relative Income Hypothesis