IEcoS (Economic Services) Economics Paper1: Questions 8  13 of 85
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Question number: 8
» Theory of Consumer's Demand » Indifference Curve Analysis and Utility Function
Describe in Detail
Discuss cross elasticity of demand. Based on such definition, how can you distinguish between substitute and complementary goods?
Explanation
Definition:
The measure of responsiveness of the demand for a good towards the change in the price of a related good is called cross price elasticity of demand. It is always measured in percentage terms.
Cross Elasticity of demand describes the change in demand of one good in response to the change in the price of another good. It is given by th
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Question number: 9
» Theory of Production » Laws of Return, Returns to Scale and Return to Factors of Production
Appeared in Year: 2011
Write in Short
Consider a linear demand function where q = quantity demanded, p. = price per unit and . Find out the average and the marginal revenue and draw the diagram.
Question number: 10
» Theory of Consumer's Demand » Indifference Curve Analysis and Utility Function
Appeared in Year: 2011
Describe in Detail
Consider the utility function where and are the quantities of two commodities on which the consumer spends his monthly income Rs. 5,000. If the price per unit of and be 50 and 20 respectively, find out the optimal quantities of and?
Explanation
Utility function is given as follows:
MU of is
MU of is
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Question number: 11
» Welfare Economics » Social Choice, Game Theory and More
Appeared in Year: 2011
Describe in Detail
In game theory, comment on the terms ‘maximin’ and ‘minimax’.
Explanation
 Maximin strategy is the conservative approach in which a player seeks to maximize the probability of minimum profit so that the degree of risk can be reduced. In this strategy, the player finds the minimum payoff in each strategy and among these chooses the one with the highest value (maximum). For e. g. Payoff matrix of firm I and II are given
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Question number: 12
» Theory of Consumer's Demand » Price Income and Substitution Effects
Appeared in Year: 2011
Describe in Detail
Define income effect, substitution effect and price effect of any change in price. Show that the price effect can be decomposed into the income effect· and the substitution effect.
Explanation

Substitution effect means the change in the demand of a good due to a change in the rate of exchange between two goods (relative prices) holding the purchasing power constant. On the other hand, Income effect is the change in the demand due to a change in the real income while the relative prices are held constant.

Price effect is the sum of
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Question number: 13
» Theory of Production » Forms of Production Functions
Appeared in Year: 2011
Write in Short
Consider a Cobb Douglas production function where K and L are respectively the capital and labour to produce output y. show that if all the factors are paid according to their marginal products, the total product will be enhausted if