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.

Screenshot 2019-11-12 at 11.11.19 PM

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

Screenshot 2019-11-12 at 11.00.16 PM.png

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


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,


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