(a) Draw a concave Production Possibility curve. What does the downward slope andthe concavity of the curve imply? 

(c) How can the cross-price elasticity of demand be used to identify the relationship between any two goods?

(b)The income elasticities of demand of two goods, X and Y are + 3.0 and − 0.2, respectively. Assuming income rises by 5 per cent. What will be the respective change in the quantities demanded of good X and good Y?

(a) With respect to the demand and supply analysis, discuss the Walrasian equilibrium and the Walrasian stability condition.

(b) Consider the following Table which gives total cost schedule of a firm. Given that the average fixed cost of producing 2 units of output is Rs. 10. Find the total variable cost, total fixed cost, average variable cost, average fixed cost, short-run average cost, and short-run marginal cost schedules of the firm for the corresponding values of output. 

(a) Given that a firm experiences a linear homogenous production function, comment upon the shape of the Expansion path, both in the long run and in the short run.

(b) Consider a consumer who has to choose between two normal goods A and B. Initially his income is Rs 10, and the per unit price of good A and good B is Rs 2 and Rs 3, respectively. Now, assume income of the consumer increases to Rs 20, the price of good A rises to Rs 3 and that of good B rises to Rs 4.50. What will be the impact of this change on the demand of the two goods?

 (a) Consider a consumer earning income M and facing a choice between two commodities X and Y available at price PX and PY, respectively. Using appropriate diagrams with plotting good X and Y on the horizontal and vertical axis, respectively, bifurcate the price effect into substitution and income effect in case the price of good Y increases from PY to PY’ and the fact that both the commodities are normal goods. 

Using appropriate diagrams discuss the rationale behind rationing system for allocation of scarce resources? What are the consequences associated with the rationing system?

Make distinction between any three of the followings: 

(i) Weak preference and strong preference
(ii) Numeraire good and non-discrete good
(iii) Homogenous function and Homothetic function
(iv) Compensating variation and Equivalent variation. 

A firm faces the Average Fixed Cost function as AFC = 200x-1 and Average Variable Cost function as AVC = 0.2x2 where x represents output. Show diagrammatically what shape will its total cost function (AC) take?

‘The second fundamental theorem of welfare economics treats the concepts of efficiency and equity differently’. Explain.

Distinguish between utility function and expected utility function. Discuss the assumptions associated with the Von Neumann Morgenstern Utility Function. 

What is consumer’s surplus and how it is measured? Explain with illustration

Given the utility function of a consumer, U = 4 A0.5 B 0.5, he spends all his income amounting Rs. 120 on the two goods A and B. Good A costs Rs. 10 a unit and B Costs Rs. 15. What combination of A and B will be purchased by him?

Given a firms’ demand schedule P = 200 – 2q and its total cost function TC = 2
3
See Answer →

. Consider A Firm facing the demand schedule P = 190 – 0.6q and the total cost function
TC = 40 + 30q + 0.4q2

a) What output will maximize profit? 
b) What output will maximize total revenue? 
c) What will the output if the firm makes the profit of Rs. 4,760

(b) For the given production function Q = 4.5 K 0.4 L 0.7 Drive a function in the form K = f (L) for the isoquant representing an output of 54. 

(a) What is the distinction between short run production function and long run production function? Explain with example and diagram the various stages of total product associated with law of variable proportions. 

(b) Consider a consumer with the utility function given by U(X, Y) = XY where X and Y represent the two goods of consumption priced at Px and Py, respectively. The income of this consumer is assumed Rs 120, Px = Rs. 3 and Py = Rs.1. Suppose price of good X falls to Rs. 2.50, what will be its impact on consumption quantities of both the goods.