WEEK 4 (DAY 3 to 7) : THEORY OF VALUE AND WELFARE ECONOMICS : GENERAL ECONOMICS PAPER I : INDIAN ECONOMIC SERVICES

In the last week, days 3 to 7, I completed videos pertaining to Theory of Value and have started Welfare economics, simultaneously. Some topics like Marshallian and Walrasian stability, cross subsidy free pricing are left, that I will be covering this week and will go deeper into welfare economics.

Sometimes, when I read the syllabus, I have a feeling, that it could be more properly arranged, for example, before talking about externalities, we should discuss Pareto efficiency in detail; also before doing aggregation problem in welfare economics, Pareto efficient needs to be done more thoroughly.

There is part 4, of Paper 1, Theory of Distribution. That I will be doing in the last, once, I have completed Welfare economics and Public goods and externalities. Also, while doing theory of Value, I thought of recording ancillary topics like product differentiation, entry deterrence, collusion etc, but then they should be rather placed in Industrial economics, in Paper 3.

Following are snapshots of recordings done in these days

Cournot Equilibrium

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Natural Monopoly and Average Cost and Marginal Cost Pricing

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Intertemporal Choice Part 1

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Intertemporal Choice Part 2

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Pareto Efficiency Meaning and Introductory Concepts

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Week 4 (Day 1 and 2) : Theory of Value : General Economics Paper I : Indian Economic Services

When I start writing notes for these videos, sometimes I get too consumed in the depth I can cover, but then nearly every time, I have to remind myself, that I have to stick to the syllabus which is given. While doing Cournot, or Bertrand or Stackelberg Model, there is so much, which I can discuss, but then given the trends in the past years and syllabus, have to restrain myself.

Also, while making these videos, I realised that it will be better, if we make notes in a question and answer format, it will have a better retention. In Indian economic services paper, this covers a part of Theory of Value (Pricing under different market forms)

Following questions, which were answered in today’s recordings are these :

  1. How does Cournot output in equilibrium compare with that of the perfect cartel? Explain mathematically and graphically.

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2. Suppose market demand function is p(Q) = a-bQ, where b > 0. There are two firms, i =1,2. The cost function of the ith firm is Ci(qi) = c.qi. Derive equilibrium output, price and industry profits under following assumptions :

  • Bertrand
  • Cournot
  • Perfect cartel

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3. Analytically show that the Nash equilibrium in Bertrand equilibrium, with two firms and the homogenous cost structure, with constant MC, c for both the firms, is given by p1* = p2* = c

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These are the snapshots of the videos which were recorded today. Two of my recordings, peak load pricing and Natural Monopoly got corrupted, so have to record them again tomorrow.

For any queries regarding the Indian economic services online course or IAS Economics optional course, pls mail us or call us

Happy studying,

Nishant

Week 3 : Theory of Value : General Economics Paper I (Indian Economic Services)

My apologies for being little late in posting this weekly post. I was little occupied with ECOPOINT classes, so didn’t get the time to post it here. I started with Topic 3, Theory of Value, General Economics Paper 1, Indian Economic Services. I like this topic, there is a lot of room to play and discuss so many things, but I have kept myself restricted to the syllabus defined.

In the syllabus, there is a subtopic, Pricing in different markets, now this involves detailed discussion of how optimal price is arrived in different market forms, perfect competition, we have already discussed, the thing which is left is, Imperfect market forms viz. Monopoly, Price discrimination in Monopoly, Peak Load pricing and Marginal cost Pricing and Natural Monopoly dilemma. These were the topics which I discussed this week. After explaining the model, have discussed the numerical example for each, to give a broader and better understanding of each of them.

This week, I didn’t record any IES past years papers, will be doing them in the coming week. I wanted to cover some room first and then move on to the past years. I will be doing the same topic 3, next week also. Particularly, topics related to Pricing in Bertrand Duopoly, Cournot Duopoly, Stackelberg Model, Collusion and Limit Pricing for Entry Deterrence will be covered in the coming week.This being an important topic, have questions been asked every year.

Following recordings have been made this week.

  • Monopoly Profit Maximisation and Lerner’s Index
  • Allocation of resources in Monopoly and Deadweight loss
  • Price Discrimination and when it is profitable and First Degree Price discrimination
  • Second Degree Price Discrimination (Block Pricing)
  • Third Degree Price Discrimination
  • Peak Load Pricing
  • Natural Monopoly and Marginal Cost PricingĀ 

This week, I countined reading ‘ Inglorious Empire‘ by Shashi Tharoor, he made an interesting case, about how British plundered all the wealth from once, very prosperous Indian Economy. They not only attacked Indians economically, for their own selfish greed, but made laws, which were against our own customs and traditions. How discrimination was prevalent throughout the period of British Raj, in myriad forms. The author, also crushed the arguments which went in favour of British Raj, by systematically showing that even there, intentions were not to help Indians but to help themselves. I have still not finished reading this, will update more in the next post

Happy studying,

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