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



2

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 2013 session, you need to submit the assignments by March 31, 2015, and for
January 2014 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.

3

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. 220=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 , . Bi-cycles and wheat
are produced by two firms which use only labour according to the production functions.

b =l

and 0.5l

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 = 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. 512=60


(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)
4


3. Discuss the approaches adopted by Pigou and Pareto for analyzing the problem of welfare
economics.
4. Write short notes on any two of the following:
(a) Envelope theorem
(b) Hidden information
(c) Actuarially Fair Premium
5. A consumers 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 Roys law is satisfied by the consumers 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.
6. 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) =

. 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?

5

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



6

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. 220=40

7. (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?
8. (a) If is the sample mean, prove that the expected value of , E equals the population
mean ().
(b) Describe the process of testing hypothesis about population proportion of a given
attribute.


Section B

Answer all the questions from this section. 512=60

9. Suppose the technology matrix is
A
0.2 0.3 0.2
0.4 0.1 0.2
0.1 0.3 0.2

Let the final demand sector be D =
10
5
6

Find the level of production of the three goods.
10. 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

11. A monopolists 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?
12. What is a Poisson distribution? Find the mean and variance of a Poisson distribution.
13. (a) Solve the following problem graphically:
Min C = 0.6x
1
+ x
2

Sub to 10 x
1
+ 4 x
2
20
5 x
1
+ 5 x
2
20
2 x
1
+ 6 x
2
12
x
1
, and x
2
0.
(b) Why does the solution occur at a corner point only? Give reasons.

8

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) Describe the nature of the financial system in a modern economy giving the important types
of constituent institutions, markets and instruments. Explain the concept of flow-of-funds in
the financial markets

2) Discuss the Markowitz theory of efficient portfolio selection. How does the CAPM theory
build on it?



SECTION-B


3) Explain the Arbitrage Pricing Theory.


4) Explain the need for, and role of depository systems in secondary markets. Explain the
concept of custodial services.

5) Give a theoretical model of central banking, bringing out the relationship between the
monetary base and monetary aggregates. What are instruments of monetary policy used by
central banks?



6) Compare the impact of monetary policy under fixed exchange rates with those under flexible
exchange rates.

7) Discuss the concept of leverage for a firm. Discuss the important financial and leverage ratios
used. Explain the Merton-Miller theorem.

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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 Indias 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.