Section A
Q1. Answer all the following seven parts :
(a) If the demand function is P = (4 - 0.5q)^2, for what value of q will the price elasticity of demand be unity?
(b) If a production function is homogeneous of degree 1, following CRS, show that the marginal productivity and average productivity functions are independent of the absolute amounts of the inputs, but depend upon the input ratios.
(c) Explain the 'peak load pricing' with reference to power sector. In what way will it increase economic efficiency?
(d) Distinguish between Ricardo and Kalecki theories of distribution. Define Hicks-Kaldor compensation principle. What are the main criticisms
(e) against this compensation principle? Show that the production function Q = log(Lβ_1 Kβ_2) is concave for all β_1, β_2 > 0.
(f) Specify an orthogonal factor model by mentioning the underlying assumptions
(g) of the model.
