MEC

MASTER OF ARTS

(ECONOMICS)

ASSIGNMENTS 2014-15 First Year Courses

(For July 2014 and January 2015 Sessions)

School of Social Sciences

Indira Gandhi National Open University

Maidan Garhi, New Delhi-110 068

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Master of Arts (Economics) Assignments

(2014-15)

Dear Student,

As explained in the programme guide for MEC, assignments carry 30 per cent weightage in a

course and it is mandatory that you have to secure at least 40 per cent marks in assignments to

complete a course successfully. Note that you have to submit the assignments before appearing

in Term End Examination of a course.

Before attempting the assignments please read the instructions provided in the programme

guide sent to you separately. There are five compulsory courses in the first year. In each

course there is a Tutor Marked Assignment (TMA). You have to prepare and submit the

assignments separately for each course. Make sure that you submit the assignments well in

time for those courses in which you plan to appear in the Term End Examination.

Submission

For July 2014 session, you need to submit the assignments by March 31, 2015, and for

January 2015 session by September 30, 2015 for being eligible to appear in the term-end

examination. Assignments should be submitted to the Coordinator of your Study Centre.

Obtain a receipt from the Study Centre towards submission.

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MEC-001: MICRO ECONOMIC THEORY

(Assignment) Course Code: MEC-001

Asst. Code: MEC-001/TMA/2014-15

Total Marks: 100

Section A

Answer all the questions from this section. 2×20=40

1. An economy comprises two consumers, 1 and 2, with two consumption goods bi-cycles (b) and

wheat���. Both consumers have the same utility function μ��, ω� ��.Bi-cyclesandwheatareproducedbytwofirmswhichuseonlylabouraccordingtotheproductionfunctions.

b =!l"andω 0.5!l%

Both firms are owned by consumer 1, and consumer 2 owns 200 units of labour.

(a) Find the production possibility frontier for this economy.

(b) Find the competitive equilibrium.

(c) Find competitive equilibrium if every consumer owns 100 units of labour and owns one

firm.

(d) Find the Pareto efficient allocations for this economy.

2. Assume that there are four firms supplying a homogenous product. They have identical cost

functions given by C (Q) = 40 Q. If the demand curve for the industry is given by µ = 100 – Q,

find the equilibrium industry output if the producers are Cournot competitors. What would be

the resultant market price? What are the profits of each firm?

Section B

Answer all the questions from this section. 5×12=60

3. (a) Distinguish between pure strategy Nash equilibrium and mixed strategy equilibrium.

When would you use mixed strategy equilibrium?

(b) Find all the Nash equilibrium of the following game:

Player1

Player 2

Left Right

Up (5,4) (1,3)

Down (4,1) (2,2)

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4.DiscusstheapproachesadoptedbyPigouandParetoforanalyzingtheproblemofwelfareeconomics.

5. Write short notes on any two of the following:

(a) Envelope theorem

(b) Hidden information

(c) Actuarially Fair Premium

6. A consumer’s utility function is given as

U(x,y) = In (x+2y-*+, )

Where x and y are two goods of consumption.

(a) Find the indirect utility function of the consumer.

(b) Examine if Roy’s law is satisfied by the consumer’s demand function for y.

(c) Find the expenditure function of the consumer e(p,u) where price of x = 1 and price of y

= p.

(d) Find the Hicksian demand function hy (p,u) for commodity y, where the price of x is 1

and the price of y is p.

7. Sita expects her future earnings to be worth Rs. 100. If she falls ill, her expected future

earning will be Rs. 25. There is a belief that she may fall ill with probability of ,- while the

probability of remaining in good health is .-. Let her utility function be given as U(y) =

/0+.suppose that an insurance company offers to fully insure Sita against loss of earnings

caused by illness against an actuarially fair premium.

(a) Will Sita accept the insurance? Explain.

(b) What is the maximum amount that Sita would pay for the insurance?

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MEC-002: MACROECONOMIC ANALYSIS Assignment

Course Code: MEC-002

Assignment Code: MEC-002/AST/2014-15

Maximum Marks: 100

Note: Answer all the questions. While questions in Section A carry 20 marks each (to be

answered in about 500 words each) those in Section B carry 12 marks each (to be answered in

about 300 words each). In the case of numerical questions word limits do not apply.

Section A

1. Derive the conditions for steady state in the Solow model. What are its implications? In what

respects is the golden rule different from the steady state?

2. Explain how IS and LM curves are derived. What are the implications of IS and LM curves?

What are the factors on which the shape of the IS and LM curves depend?

Section B

3. What does the Phillips curve signify? How do you reconcile the difference in the shape of the

curve in the short run and the long run?

4. Lucas’ point of view, what are the limitations of the Keynesian model? What improvements

does he suggest?

5. What is meant by endogenous growth? Explain the main features of endogenous growth

models.

6. An economy with fixed exchange rate cannot maintain an independent monetary policy. Do

you agree with the above statement? Substantiate your answer with appropriate diagrams.

7. Write short notes on the following.

a) Rational Expectations

b) Search and Matching Model

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MEC-003: QUANTITATIVE METHODS (Assignment)

Course Code: MEC-003

Asst. Code: MEC-003/TMA/2014-15

Total Marks: 100

Section A

Answer all the questions from this section. 2×20=40

1. (a) Write a linear first – order differential equation and work out its general solution.

(b) How will you solve the Harrod-Domar formulation of steady growth through differential

equations?

2. (a) If 1̅ is the sample mean, prove that the expected value of 1̅, E�1̅� equals the population

mean (μ).

(b) Describe the process of testing hypothesis about population proportion of a given

attribute.

Section B

Answer all the questions from this section. 5×12=60

3. Suppose the technology matrix is

A 50.2 0.30.20.4 0.10.20.1 0.30.29

Let the final demand sector be D = 51056 9 Find the level of production of the three goods.

4. From the following data, obtain the two regression equations Y on X and X on Y.

X 2 4 6 8 10

Y 5 7 9 8 11

5. A monopolist’s demand curve is given by P = 100 – 2q.

(a) Find his marginal revenue function.

(b) At what price is marginal revenue zero?

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(c) What is the relationship between the slopes of the average and marginal revenue

curves?

6. What is a Poisson distribution? Find the mean and variance of a Poisson distribution.

7. (a) Solve the following problem graphically:

Min C = 0.6x1 + x2

Sub to 10 x1 + 4 x2 ≥20 5 x1 + 5 x2 ≥20

2 x1 + 6 x2 ≥12

x1 , and x2 ≥0.(b) Why does the solution occur at a corner point only? Give reasons.

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MEC-004: ECONOMICS OF GROWTH AND

DEVELOPMENT Assignment

Course Code: MEC-004

Asst. Code: MEC-004/AST/2014-15

Maximum Marks: 100

Note: Answer all the questions. While questions in Section A carry 20 marks each (to be

answered in about 500 words each) those in Section B carry 12 marks each (to be

answered in about 300 words each). In the case of numerical questions word limits do not

apply.

SECTION A

1) Examine the effect of population growth in the Solow model of economic growth. Discuss

how the Solow model could be used to explain poverty traps in developing nations.

2) Describe the Mankiw-Romer-Weil extension to the neoclassical model to include human

capital. Explain why diminishing returns to capital do not take place in the AK model.

SECTION B

3) Distinguish between economic growth and development. Briefly mention the main benefits

that economic growth confers upon society.

4) Describe Pasinetti's theory of economic growth and distribution.

5) Describe the various approaches to the measurement of total factor productivity.

6) What are the main propositions of the Real Business Cycle model? Describe the basic

structure of a prototype Real Business Cycle model.

7) Compare and contrast the Uzawa two-sector growth model with the Feldman model.

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MEC-005/105: INDIAN ECONOMIC POLICY

Assignment (TMA)

Course Code: MEC-005

Assignment Code: MEC-005/105/AST/2014-15

Maximum Marks: 100

Note: Answer all the questions. While questions in Section A carry 20 marks each (to be

answered in about 700 words each) those in Section B carry 12 marks each (to be answered in

about 500 words each).

Section-A

1. Distinguish between “economic growth” and “economic development”. How is economic

development a better measure of economic welfare?

2. What are the constituents of financial system? Critically evaluate the impact of reforms

introduced in the equity and foreign exchange market.

OR

Give an account of major changes that have taken place in Indian economy over the last

six decades. What are the implications of expansion in the services sector for employment

and poverty?

Section-B

3. “More people mean more resources”.

Comment on the above statement.

4. Explain the important issues which are crucial for promotion of Indian exports and

hence need to be addressed in India’s trade policy.

5. Explain the role of agricultural policy in raising public investment in agriculture.

6. Which changes would you like to make in trade and industrial policies to ensure rapid

growth of GDP while maintaining adequate macro-economic balance?

7. Do you think that existing institutional structure in India has not led to good governance?

Give reasons in support of your answer.