Unique Paper Code 907
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Introductory MicroeconomicsJanuary 2024, paper 907

BA (Programme) · 8 questions · 6 parts still being checked

Duration: 3 HoursMaximum Marks: 90

Reworded by Kunji from the printed paper. The original paper belongs to the University of Delhi. See DU's question bank.

Before you start

  1. This paper. Attempt any five questions. All questions carry equal marks.
  2. Most asked here. Supply, demand and market equilibrium (8 papers), Games and strategic interaction (8 papers), Externalities (8 papers). These come back almost every year, so learn them first. The asked N× note beside each part counts the DU papers that set its topic.
  3. Numbers and theory. 3 numerical parts and 16 theory parts. Numericals take longer to lay out, so give them your freshest time.
  4. Pace. Two minutes a mark: about 36 minutes for each 18-mark question, with nothing spare in 3 hours. Move on when the time is up.
  5. Keep score. Every part opens a worked answer checked against the books. Turn the key when you have revised it; the boxes at the top fill in, on this device.

1.

18 marks
· ~36 min
(a)Taxing the wealthy to support poor families: the trade-off between equity and efficiencyasked 5×Country A's government takes to wealthy citizens and uses this sum to distribute to low income families. Which kind of tradeoff is likely to arise in such a situation?(6)
(b)One example each for three principles of economics: incentives, government and the marginasked 5×Give one example for each of the following principles : (i) People respond to incentives. (ii) Governments can at times improve outcomes in the market. (iii) Rational people think at the margin.(12)

2.

18 marks
· ~36 min
(a)A positive and a normative statement, with the test that separates themasked 5×Give one example each of a positive and of a normative statement.(4)
(b)Comparative advantage explained with two onion and grape growers in Nashikasked 7×Explain the principle of comparative advantage with an example.(6)
(c)Strategies, payoffs and rationality in strategic games, with a Diwali discount gameasked 8×Define strategies, payoffs and rationality in the context of strategic games.(8)

3.

18 marks
· ~36 min
(a)How much the quantity of good X falls when its price rises from Rs. 10 to Rs. 15: short run and long run, by the mid-point methodasked 7×Assume the price elasticity of demand for good X is 0.3 in the short run and 0.6 in the long run. Suppose the price of Good X goes up from Rs. 10 per unit to Rs. 15 per unit, by how much will the quantity be altered (i)…(6)
(b)A fall in the price of X with elastic demand: total expenditure risesasked 7×Will a fall in the price of X lead to an increase or a decrease in the total expenditure on X, if the demand for X is elastic? Explain.(6)
(c)
Price gouging, with an example after a cycloneBeing checked
(6)

4.

18 marks
· ~36 min
(a)
Price ceilings, floors and rationingBeing checked
(6)
(b)Elasticity and tax incidence: the less elastic side bears more of the taxasked 7×In brief, explain the relation between elasticity and tax incidence.(6)
(c)
Supply, demand and market equilibriumBeing checked
(6)

5.

18 marks
· ~36 min
(a)
Supply, demand and market equilibriumBeing checked
(8)
(b)
Consumer and producer surplus, tariffs and quotasBeing checked
(10)

6.

18 marks
· ~36 min
(a)Equilibrium of Q = 360 − P and Q = 2P, with the elasticities of demand and supply at that pointasked 8×For the demand and supply curves given below, find the equilibrium price and quantity, and the elasticity of demand and the elasticity of supply at the equilibrium point. Demand curve Q = 360 – P Supply curve Q = 2P(8)
(b)A tax of Rs. 10 a unit on consumers with Q = 360 − P and Q = 2P: the price paid and the price receivedasked 7×Find the price paid by the consumers and the price received by producers when a tax of Rs. 10 per unit is levied on the consumers.(10)

7.

18 marks
· ~36 min
(a)Public goods defined, with one example each of a private good, a public good, a club good and a common resourceasked 7×Define the term public goods. Give one example each of a private good, a public good, a club good and a common resource.(10)
(b)The free rider problemasked 7×Explain the free rider problem.(8)

8.

18 marks
· ~36 min
(a)How the deadweight loss of a tax depends on the size of the tax and on the elasticities of demand and supplyasked 7×In what way is the deadweight loss of a tax, related to the magnitude of the tax and to the elasticities of demand and of supply?(9)
(b)
Cutting city pollution: command and control, unequal cuts by different firms, and tradable pollution rightsBeing checked
(9)

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