Eco Topics for GD/PI Prep By prof_calculus

[prof_calculus]

Originally Posted by BUGS BUNNY

My guess would be that the material is pretty easy to understand as of now
Maybe as we move towards advanced topics, you might have more doubts pouring in

P.S. - One more topic thats been bugging me I have no idea why but this particular topic seems to be at the back of my mind..nagging away Capital Account Convertibility. I somehow couldnt find the time to google about it.
If you feel that ths topic could be dealt with after sometime...so be it

-
Bugs

Our purpose is not to go deep into economics but to help our friends prepare well for GDPI. We will touch topics like inflation, capital account convertibility, introduction to Sensex and Nifty etc., economics topics will be dealt upon in Indian context.

Not for a second do I intend to spam or interrupt and do hope my conrtibution isn't seen as an intrusion...

Copying some info I had posted on the UDT thread.

No problem in pasting from WiKi, I too sometimes borrow from it. But I tailor it to make it comprehensible.
You may also do it by a little editing.

[prof_calculus]

“The basic objective of development is to create an enabling environment in which people can enjoy long, healthy and creative lives.”

Mahbub ul Haq (Well known Pakisani Economist, pioneer of Human Development Index) in first Human Development Report in 1990

The HDI provides a composite measure of three dimensions of human development:
living a long and healthy life (measured by life expectancy), being educated measured by adult literacy and enrolment at the primary, secondary and tertiary level) and having a decent standard of living (measured by purchasing power parity, PPP, income). The index is not in any sense a comprehensive measure of human development. It does not, for example, include important indicators such as respect for human rights, democracy and inequality. What it does provide is a broadened prism for viewing human progress and the complex relationship between income and well-being.

The average person in Norway (at the top of the HDI league) and the average person in countries such as Niger (at the bottom) certainly live in different human development districts of the global village. People in Norway are more than 40 times wealthier than people in Niger. They live almost twice as long. And they enjoy near universal enrollment for primary, secondary and tertiary education, compared with an enrollment rate of 21% in Niger. For the 31 countries in the low human development
category—a group with 9% of the world’s people—life expectancy at birth is 46 years, or 32 years less than in high human development countries.

Perhaps more powerfully than any other indicator, child mortality demonstrates that increases in income are not equivalent to improvements in human development.
Measured by wealth generation, India is one of the success stories of globalization.
While India has outperformed Bangladesh in economic growth and average income, Bangladesh has outperformed India in reducing child death rates, maintaining a rate of decline of 3.45% since 1990. The contrasting fortune of children in India and Bangladesh when assessed on survival prospects points to the limits of wealth as a metric for measuring human development.



Excerpts from Human Development Report 2006

[writetotanveer]

Originally Posted by BUGS BUNNY

Prof....Now that you mentiong Law of Diminishing Returns/Marginal utility I distinctly remember a prof in XL interviews asking me about Law of Increasing Returns last year. Are these two the same?
If not what exactly is the law of inreasing returns and if they are the same then could you please explain the concept of marginal utility and the law of diminising returns

P.S. I know that you have touched upon the concept in your last post but still would be better if we could have a separate post on it.

-
Bugs

Wow! What a wonderful thread!!!. And what a terrific effort byour own resident Prof!!. At this rate those of us lucky in enough to get admits to B-schools might be even able to bunk the initial Eco classes. Joke maara!!. Hehehehe.

Hey Bugs!!!

Let me try to answer your question ( even I used to teach Economics at the plus two level for a couple of years..so rest assured ..wont mislead you!! )


And Prof Calc can ratify..

In economics, diminishing returns is also called diminishing marginal returns or the law of diminishing returns. According to this relationship, in a production system with fixed and variable inputs (say factory size and labor), beyond some point, each additional unit of variable input yields less and less additional output. This concept is also known as the the law of diminishing returns or law of increasing opportunity cost. Although ostensibly a purely economic concept, diminishing marginal returns also implies a technological relationship. It is possibly among the best-known economic "laws."



As far as increasing returns are concerned you have to understand it in the context of Returns to Scale:

Increasing Returns to Scale

When our inputs are increased by m, our output increases by more than m.
Constant Returns to Scale

When our inputs are increased by m, our output increases by exactly m.
Decreasing Returns to Scale

When our inputs are increased by m, our output increases by less than m.
Our multiplier must always be positive, and greater than 1, since we want to look at what happens when we increase production

An m of 1.1 indicates that we've increased our inputs by 10% and an m of 3 indicates that we've tripled the amount of inputs we use. Now we will look at a few production functions and see if we have increasing, decreasing, or constant returns to scale.

1. Q = 2K + 3L. We will increase both K and L by m and create a new production function Q’. Then we will compare Q’ to Q.
   Q’ = 2(K*m) + 3(L*m) = 2*K*m + 3*L*m = m(2*K + 3*L) = m*Q
   After factoring I replaced (2*K + 3*L) with Q, as we were given that from the start. Since Q’ = m*Q we note that by increasing all of our inputs by the multiplier m we've increased production by exactly m. So we have constant returns to scale.
2. Q=.5KL Again we put in our multipliers and create our new production function.
   Q’ = .5(K*m)*(L*m) = .5*K*L*m2 = Q * m2
   Since m > 1, then m2 > m. Our new production has increased by more than m, so we have increasing returns to scale.
3. Q=K0.3L0.2 Again we put in our multipliers and create our new production function.
   Q’ = (K*m)0.3(L*m)0.2 = K0.3L0.2m0.5 = Q* m0.5 Since m > 1, then m0.5 < m. Our new production has increased by less than m, so we have decreasing returns to scale.

Thus in the initial stages of production a firm will face increasing returns, then constant returns and towards the end it faces Decreasing returns.

Regards
Tanveer

p.s All this is stuff taken from the net but I dont exactly know all the sources..my own note seem long lost..!!!probably destroyed by my dear students..!!!

[prof_calculus]

Originally Posted by writetotanveer

In economics, diminishing returns is also called diminishing marginal returns or the law of diminishing returns. According to this relationship, in a production system with fixed and variable inputs (say factory size and labor), beyond some point, each additional unit of variable input yields less and less additional output. This concept is also known as the the law of diminishing returns or law of increasing opportunity cost. Although ostensibly a purely economic concept, diminishing marginal returns also implies a technological relationship. It is possibly among the best-known economic "laws."
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Good stuff. Thanks Tanveer for such a good explanation.

I hope you would be at this thread and help our friend clear their doubts.

The thread would sure be enriched by your company.

Regards
pc

[maheshtk_21]

Amazing opportunity to learn .If we go at this rate, sab eco me experts ban jaayenge.

I have one suggestion though.
Lets prepare a list of topics to be discussed every week or better let Professor himself deciede on the topics for the week. then on two days ,say weekends, we can ask all our doubts regarding the topics of the week.Plus any new concepts that we want to learn may be presented to Prof.

This can ensure learning in the proper flow.If we do this, the basics can be covered first and then we can go for further knowledge. Otherwise there would be excessive and unrelated information.

[prof_calculus]

Originally Posted by maheshtk_21

Amazing opportunity to learn .If we go at this rate, sab eco me experts ban jaayenge.

I have one suggestion though.
Lets prepare a list of topics to be discussed every week or better let Professor himself deciede on the topics for the week. then on two days ,say weekends, we can ask all our doubts regarding the topics of the week.Plus any new concepts that we want to learn may be presented to Prof.

This can ensure learning in the proper flow.If we do this, the basics can be covered first and then we can go for further knowledge. Otherwise there would be excessive and unrelated information.

Thanks maheshtk_21,
Actually I am a little busy in these days, and I find it difficult to assess the learning requirement of friends- the GDPI call getters.

If you help me in that and suggest topics as Bugs does sometimes (topics?? the thread itself is Bugs' idea). It will sure try to handle that.

pc

[lionkiller]

gret GREAT initiative pro. thnks for the content pls be continue and help people like us

[ashish banaya..]

Originally Posted by writetotanveer

An m of 1.1 indicates that we've increased our inputs by 10% and an m of 3 indicates that we've tripled the amount of inputs we use. Now we will look at a few production functions and see if we have increasing, decreasing, or constant returns to scale.

1. Q = 2K + 3L. We will increase both K and L by m and create a new production function Q’. Then we will compare Q’ to Q.
   Q’ = 2(K*m) + 3(L*m) = 2*K*m + 3*L*m = m(2*K + 3*L) = m*Q
   After factoring I replaced (2*K + 3*L) with Q, as we were given that from the start. Since Q’ = m*Q we note that by increasing all of our inputs by the multiplier m we've increased production by exactly m. So we have constant returns to scale.
2. Q=.5KL Again we put in our multipliers and create our new production function.
   Q’ = .5(K*m)*(L*m) = .5*K*L*m2 = Q * m2
   Since m > 1, then m2 > m. Our new production has increased by more than m, so we have increasing returns to scale.
3. Q=K0.3L0.2 Again we put in our multipliers and create our new production function.
   Q’ = (K*m)0.3(L*m)0.2 = K0.3L0.2m0.5 = Q* m0.5 Since m > 1, then m0.5 < m. Our new production has increased by less than m, so we have decreasing returns to scale.

Sirjee simply too good a xplanation

[DMA Controller]

Dearest Resident Eco Prof Calculus,

This thread is a boon for people like me. I was haunted during one of my mock PI's. The panel kept asking me Eco related questions. Some of them are:

1) When the European Union was formed, what sort of changes(economic) happened and how was the currency conversion done?? Is the GDP measured for each country or for the union as a whole??

2) What are M1,M2, M3.(Silly question I know, but honestly I dont know this)

3) Could you tell me more about the taxes that are levied in India, and of course, har panel ka favourite.. Sensex also

Thanks in advance,
DMA Controller.

[prof_calculus]

Originally Posted by DMA Controller

Dearest Resident Eco Prof Calculus,

This thread is a boon for people like me. I was haunted during one of my mock PI's. The panel kept asking me Eco related questions. Some of them are:

1) When the European Union was formed, what sort of changes(economic) happened and how was the currency conversion done?? Is the GDP measured for each country or for the union as a whole??

2) What are M1,M2, M3.(Silly question I know, but honestly I dont know this)

3) Could you tell me more about the taxes that are levied in India, and of course, har panel ka favourite.. Sensex also

Thanks in advance,
DMA Controller.

Hi DMA
I have noted down your queries. I will sure try to cover all of these in coming few days, and will try to keep it comprehensible for non- economics people also.

Just came from Fag hoisting in office. Preparing for todays topic.

I will post it in an hour or two.

Thanks
pc