(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.

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

(c) What could bring a leftward shift in the production possibility curve?

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

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

 (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. 

(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?