WEST BENGAL CIVIL SERVICE
EXAMINATION - 2006
Economics Paper-I
Time Allowed-3 Hours Full Marks-100
( Answer any five questions, taking at least two from Group A, two from Group B and one from Group C.)
Group - A
1. What is the difference between :
(a) Real and Nominal prices ;
(b) Perfect Substitutes and Perfect Complements ;
(c) Short-run and long-run elasticities ;
(d) Micro-economics and Macroeconomics.
2. Answer the following :
(a) Show that the elasticity of demand is the same at all points on the demand curve q = cp°
(b) The demand for a commodity is given by p = a + bq. Prove that the slope of the marginal revenue associated with a linear Marshallian demand curve is always twice that of the demand curve.
(c) Given Y = C + I + G
c = Co + bY,
I = Io
and G = Go
Where Co = 135, b = 0.8, Io = 75, and Go = 30
(i) Find the equation for the equilibrium level of income in the reduced form,
(ii) Solve the equilibrium level of income
(a) directly, (b) with the reduced form.
(iii) Find the profit-maximizing level of
(a) output, (b) price, and (c) profit for a monopolist where demand functions are given as
x = 50 - 0.5 P ........(eqn. 1)
y = 76 - Py ............. (eqn. 2)
and the total function
C = 3x2 + 2xy + 2y2 + 55 ........... (eqn. 3) 5x4 = 20
3. The marginal cost pricing has some limitations. That is why the firms like to adopt average cost pricing technique and follow the so-called 'Mark-up Rule' method. Explain average cost pricing method along with the Mark-up Rule. 20
4. Define bilateral monopoly. How is price determined under bilateral monopoly ? Do you think game-theoretic strategy can throw some light on the pricing process ? 16+4
5. The quantity theory of money emphasises the substitution of money for goods. The Keynesian approach by contrast, emphasises the substitution of money for bonds or, more generally, interest-bearing financial assets. —Discuss.
Group - B
6. (a) Explain the complete Keynesian model of income determination with the help of given LM and IS Schedules. Draw diagram,
(b) What are the weaknesses of the model ? 16+4
7. In both Keynesian and Classical macroeconomics a cut in money wages will raise employment if, and only if, it reduces the real wage. —Explain. Why does a cut in money wages always reduces the real wage in classical economics, but not in the Keynesian system ? 20
8. Answer any two of the following :
(a) According to the Harrod-Domar model, if the marginal output/capital ratio is 0.5, the saving rate is 0.2, and the foreign aid to GNP is 0.5, what will be the equilibrium growth rate of output ? Give reasons,
(b) In a Cobb-Douglas neoclassical growth model with constant returns to scale, the elasticity of labour is 0.60. If labour remains constant while capital increases by 5%, how much will the output increase ? Give reasons,
(c) Under perfect competition wnen does the price system ensure an efficient output selection ? Give reasons,
((d) Assume that you are a New Classical theorist. What will, according to you, be the impact of a contractionary Fiscal policy ? Give reasons. 10x2 = 20
9. Briefly discuss the following : 5x4 = 20
(a) Vertical equity,
(b) Tax-push inflation,
(c) Spread effects,
(d) Tariff.
10. What are some of the assumptions on which the Heckscher-Ohlin theory of trade is based ? Why does the Heckscher-Ohlin model needs to be extended ? 15+5
Group - C
11. Critically examine the 'Big-Push' theory of economic development. 20
12. Trace the relationship between the marginal revenue and the price elasticity of demand. Use algebraic manipulation to prove the result. 20
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