Saturday, 28 March 2015

General Equilibrium - Illustration (Lexicographic Preferences)

By Aleesha Mary Joseph

Consider a 2*2 pure exchange economy (ie 2 goods & 2 consumers).

The endowments are –  Individual 1 (8,8)
                                   Individual 2 (2,2).

Utility functions are as follows:

(1) Individual 1 has lexicographic preferences with respect to X. That is
  The bundle (x1 , y1) will be preferred to (x2 , y2) when x1>x2.
   But if x1=x2, then the bundle (x1 , y1) will be preferred to (x2 , y2) if and only if y1>y2.

(2) Individual 2’s utility function is given by U(x,y) = x^2 + y^2

Now our task is to find the contract curve and the competitive equilibrium.

SOLUTION

(I) CONTRACT CURVE

First convince yourself that we cannot construct indifference curve (IC) for individual 1’s preferences. Because there are no 2 distinct bundles between which individual 1 will be indifferent.

Now let’s figure out how 2nd individual’s IC looks like.

For example let’s plot IC that represents 4 utils. Ie x^2 + y^2 = 4. Note that this is actually the equation of a circle centered at (0,0), with radius 2. Also since we are bothered about only positive values of x & y, IC representing 4 utils will be represented as follows:




Now let us put everything in our edgeworth box as in the following figure(please google or refer any standard microeconomic textbook if you don’t know what an edgeworth box is). The dark point represents the endowment.




Now let us find the pareto efficient points. Pick any IC of individual 2 (say the red one). Now consider the point A. If we move along the IC in the direction given by the arrows, then individual 1 is getting better off and individual 2 is not getting worse. Hence the point A is not pareto efficient. Using the same logic we can argue out that there is only 1 pareto efficient point along the red IC and that is B. Now convince yourself using the same argument that all the points along O1B and BO2 are pareto efficient. Hence the contract curve is O1B and BO2.

(II) COMPETITIVE EQUILIBRIUM

Notations : X11 – quantity of good 1 demanded by individual 1
      X12 – quantity of good 2 demanded by individual 1
      X21 – quantity of good 1 demanded by individual 2
      X22 – quantity of good 2 demanded by individual 2
       Mi   - Income of individual i.

First of all let us write down the demand function for individual 1

(X11, X12)  =  (M1/P1 ,  0)  { Because for individual 1 only consumption of good 1 matters. }
The demand function for individual 2 is derived using the same logic as mentioned in the previous file (similar to the max function in the file).

        (X21, X22)  =  (M2/P1 ,  0)                                    when P1 / P2 < 1

      (M2/P1 ,  0)  or (0, M2/P2)                                 when P1 / P2 = 1

        (0, M2/P2)                                                          when P1 / P2 > 1

Normalize P2 = 1.

Now,

Since individual 1’s endowment is (8,8), income of individual 1 M1 = 8P1 + 8.

Since individual 2’s  endowment is (2,2), income of individual 1 is M2 = 2P1 + 2.

Note that since individual 1 consumes only good 1, all of good 2 has to be consumed by individual 2.
Hence from individual 2’s demand given above, it is clear that P1 / P2 has to be greater than or equal to 1. Since P2 is normalized, P1 ≥ 1.
Note that the budget line should pass through the endowment. 

CASE I
Suppose the budget line is the green line given below.




On extending the green line we get the following figure:




Convince yourself that:
The extended green line is the budget line faced by individual 1.
Given this budget line, individual 1 will consume the bundle P.
This implies that in the economy there will be excess demand for good 1 as individual 1’s consumption is outside the edgeworth box.

CASE II

Suppose the budget line is the RED line given below.




On extending the red line we get the following figure:



Convince yourself that:
The extended RED line is the budget line faced by individual 2.
Given this budget line, individual 2 will consume the bundle Q.
This implies that in the economy there will be excess demand for good 2 as individual 2’s consumption is outside the edgeworth box.


CASE III
Suppose the budget line is the BLUE line given below.



Convince yourself that when the budget line is the blue line, it is optimal for both individuals 1 and 2 to consume the bundle B. Hence the price ratio associated  with the blue line will be the competitive equilibrium price ratio. Since (8,8) is the coordinate of the black dot and (10,0) is the coordinate of B, the euilibrium price ratio P1/P2 = 4.

From the above three cases note that competitive equilibrium can occur only in the third case and in the other 2 cases markets do not clear.
On summarising, competitive equilibrium allocation is (10,0) for individual 1 and (0,10) for individual 2 with competitive equilibrium price ratio being  4.

(Aleesha Mary Joseph graduated from St. Stephen's College in 2013. She is currently pursuing MA in Economics at Delhi School of Economics)

General Equilibrium - Illustration (Max and Min Functions)

By Aleesha Mary Joseph

FINDING OPTIMAL DEMAND FOR GOOD X AND GOOD Y WHEN THE UTILITY FUNCTION OF THE CONSUMER IS
                                                
  U = min{ X+2Y , 2X +Y }  

Subject to the budget constraint  Px X  +  Py Y  =  M  
where Px is the price of good X and Py the price of good Y.

Step 1

Let us first figure out the indifference curve(IC) pertaining to this particular utility function. We know that IC is the combination of all those bundles (x,y) which gives same utility to the consumer. So let us keep utility constant at say 10. Then now our task is to plot  min{ X+2Y , 2X +Y }  = 10 on the X-Y space. If min{ X+2Y , 2X +Y }  = 10, then either (i) X+2Y  = 10  OR  (ii) 2X+Y  = 10.  Let us plot (i) & (ii) on the same graph:






Note that (i) & (ii) intersects when X=Y. And slope of (i) is ½ and slope of (ii) is 2.






 Now note that the yellow region corresponds to X + 2Y < 10. Also at any point on the red line 2X + Y =10. These statements imply that at any point on the red line min{ X+2Y , 2X +Y }  = min{ <10 , 10 }. ie min{ X+2Y , 2X +Y } < 10. This implies that the red line is not part of the IC representing 10 utils. 







 Similarly the orange region corresponds to 2X + Y < 10. Also at any point on the blue line X + 2Y =10. These statements imply that at any point on the red line min{ X+2Y , 2X +Y }  = min{ 10 , <10 }. ie min{ X+2Y , 2X +Y } < 10. This implies that the blue line is not part of the IC representing 10 utils. 





Note that the grey region corresponds to X + 2Y > 10. Also at any point on the purple line 2X + Y =10. These statements imply that at any point on the purple line min{ X+2Y , 2X +Y }  = min{ >10 , 10 }. ie min{ X+2Y , 2X +Y } = 10. This implies that the purple line is part of the IC representing 10 utils. 





Similarly, the blue region corresponds to 2X + 2Y > 10. Also at any point on the orange line X + 2Y =10. These statements imply that at any point on the orange line min{ X+2Y , 2X +Y }  = min{ 10 , >10 }. ie min{ X+2Y , 2X +Y } = 10. This implies that the orange line is part of the IC representing 10 utils

Thus from the above arguments it is clear that the points on the red and blue lines are not part of the IC that gives 10 utils. That is those points do not solve min{ X+2Y , 2X +Y }  = 10. Therefore let us erase the red and blue line segments from our figure. While the points on the purple and orange lines solve min{ X+2Y , 2X +Y }  = 10.




 The figure ABC represents all those bundles (x,y) which satisfy min{ X+2Y , 2X +Y }  = 10. Hence ABC is the IC which represents 10 utils. Note that slope of BC is ½ and slope of AB is 2.
The Indifference map is as follows:




Now let us consider various price ratios and figure out where the consumer will consume.


Step 2

(1) If Px/Py < ½ then budget line would look like the red line in the following figure:



The highest IC that touches the budget line is the blue colored one and hence the optimal consumption will be at E. At E consumer spends his entire income on good X and consumes zero of the other good.




(2) If Px/Py >2 then budget line would look like the red line in the following figure. The highest IC that touches the budget line is the blue colored one and hence the optimal consumption will be at F. At F consumer spends his entire income on good Y and consumes zero of good X



                                     



(3) If ½<Px/Py <2 then budget line would look like the red line in the Figure 10 The highest IC that touches the budget line is the blue colored one and hence the optimal consumption will be at G. We know that at the kink G X=Y. Substitute this in the budget constraint. Then we will get the optimal consumption as X = Y = M/(Px + Py).



                                      





(4) If Px/Py = ½, then any point on BC is optimal. And any point on BC will satisfy X + 2Y = 10 & the inequality X≥Y.





                       
(5) Similarly when Px/Py = 2 any point on AB is optimal. And any point on AB will satisfy 2X +Y = 10 & the inequality Y≥X.


To summarize we can write demand for x & y as follows:
(x,y)  =   (M/Px, 0)                                                                          when Px/Py  < ½
              All (x,y) such that X + 2Y = 10 & X≥Y                                  when Px/Py  =½
             (M/(Px+Py), M/(Px+Py))                                                    when ½<Px/Py<2
              All (x,y) such that 2X + Y = 10 & Y≥X                                  when Px/Py  =2
              (0 , M/Py)                                                                        when Px/Py  >2



FINDING OPTIMAL DEMAND FOR GOOD X AND GOOD Y WHEN THE UTILITY FUNCTION OF THE CONSUMER IS
                                                  U = max{ X+2Y , 2X +Y }  


Using the same technique of analysis as in the previous question, the IC map of the max function would be as follows:





Exercise: Consider ABC is the IC representing 10 utils. Then Find the coordinates of the points A & C. Now verify that the slope of AC is 1. Convince yourself that for any given IC the slope of the line segment joining the end points of the IC (like A & C) is 1.

1) When Px/Py<1ie slope of the budget line (red line) is less than 1.







Clearly consumer will optimally choose the bundle C.



2) When Px/Py>1ie slope of the budget line (red line) is greater than 1.




In this case optimal consumption will be at A.


3) When Px/Py=1ie slope of the budget line (red line) is equal to 1.





In this case optimal consumption will be at A & C.


To summarize we can write demand for x & y as follows:
(x,y)  =   (M/Px, 0)                                                                        when Px/Py  < 1
               (M/Px, 0) or (0, M/ Py )                                                  when Px/Py  =1
               (0, M/ Py )                                                                     when Px/Py  >1


(Aleesha Mary Joseph graduated from St. Stephen's College in 2013. She is currently pursuing MA in Economics at Delhi School of Economics)

Thursday, 22 January 2015

General Equilibrium - Illustration (Cobb-Douglas)

By Aleesha Mary Joseph

Let's begin with an easy one to understand the concept of General Equilibrium.

Suppose, U1(X11 , X12 ) = X11 X12 and U2(X21 , X22 ) = X21 X22 .

Let (e11 , e12 ) = (10,0) & (e21 , e22 ) = (0,10).

Normalize P2 to be equal to 1.

Then note that individual 1’s income M1 = 10*P1 + 0*1 = 10P1.
Similarly individual 2’s income M2 = 0*P1 +1 0*1 = 10.

Since the utility functions are cobb douglas, demand functions can be derived by equating MRS with P1/P2 and substituting the relevant expression in the budget constraint.

The demand functions so derived will be as follows:
X11 = M1 /2P1 = 10P1/2P1 = 5

X12 = M1 /2P2 = 10P1/2P2 = 5P1 (Because P2 is normalized to 1)

X21 = M2 /2P1 = 10/2P1 = 5/P1

X22 = M2 /2P2 = 10/2P2 = 5 (Because P2 is normalized to 1)

The Market clearing condition says

X11 + X21 = e11 + e21

5 + 5/P1 = 10. 

On solving this we get P1 = 1. Hence the competitive equilibrium price ratio P1/P2 = 1

Convince yourself that the same price ratio will clear the market clearing equation for good 2 as well ie X12+ X22 = e12 + e22 .

Substituting P1 =1 in the demand functions, we get the competitive equilibrium allocation
As (X11 , X12 ) = (5,5)
     (X21 , X22 ) = (5,5)

With competitive equilibrium price P1/P2 as 1.

The articles to follow will cover min/max utility functions and lexicographic preferences. Stay tuned.

(Aleesha Mary Joseph graduated from St. Stephen's College in 2013. She is currently pursuing MA in Economics at Delhi School of Economics)

Sunday, 18 January 2015

General Equilibrium

By Aleesha Mary Joseph

Hi friends,

This blog is already rich with advice for cracking DSE entrance. I would just like to emphasize on one thing i.e, doubt clearance. Because it is disheartening to see a question in the examination which you had marked as doubt in your preparatory material. It can even cost you a place in DSE.

No doubt is silly. If you find it hard to ask your teacher, then 

1)  Ask your friends or classmates. 

2)  Mail it to anyone who you think would know the answer. Doesn't matter even if the person is someone whom you have never met {may be you can message current DSE students (list available on DSE’s website) via Facebook}. 

3)  Post your questions on groups meant for economics entrance preparations. Even if you think your questions are very trivial, just post it, because there will definitely be many other students with the same doubt but are just shying away from posting the same. One such group can be found at http://economicsentrance.in/ (Group by Amit Goyal)

 Whatever the way is just make it a point to clear all your doubts before the D-day!!

For many students the general equilibrium(GE) section is scary and that is mostly because of their lack of knowledge on how to approach the GE problems. Trust me once you look at the technique GE becomes your cup of tea! 

I believe the following material on GE problems may be of some help to students who don’t attend coaching classes. I have skipped many steps. But feel free to ask for any further explanations. The material was made assuming that you already have some basic knowledge about GE set up. Please refer Nicholson & Snyder for conceptual clarity. The best way to master GE problems is by making your own problems with all sorts of utility functions and trying out in square and rectangular edgeworth box. If you go through the past year question papers you will get an idea of the various kinds of utility functions that the DSE faculty like. Most questions can be answered once you find the contract curve and competitive equilibrium allocation. So try to find the same for all sorts of weird looking combinations of utility functions and endowments: P Enjoy practicing and GE problems will be a cakewalk for you in the exam. Few questions can be found at http://econdse.org/pghosh-001/  :) 

General Set Up

Suppose individual 1’s utility function is represented by U1 (X11 , X12 ) and for individual 2 it is U2 (X21 , X22 ). 

Let the endowment for individual 1 be (e11 , e12) and for individual 2 it is (e21 , e22).
To find the competitive equilibrium allocation following steps are recommended:

1)  Find individual demands for good 1 and 2. ie X11 , X12  , X21 and  X22 . These quantities will be a functions of P1 / P2 . (or will be functions of P1 alone if we normalize P2 to be 1)

2)  Then equate X11 + X21 = e11 + e21 for this is the market clearing condition for good 1. i.e the total quantity of good 1 being demanded by individuals 1 & 2 should be equal to the total supply of good 1 available in the economy.

3)  On solving the above equation we will get the competitive equilibrium price ratio P1 / P2 .

4)  By Walras’s law the equilibrium price ratio obtained above will clear the market for good 2 as well.

General Equilibrium problems with step by step solutions will be covered in the articles to follow. Stay tuned.

(Aleesha Mary Joseph graduated from St. Stephen's College in 2013. She is currently pursuing MA in Economics at Delhi School of Economics)

Monday, 5 January 2015

Let's bell the CAT

By Suhani Popli

It was nearly a year and a half ago, when I was one of those many final year kids, juggling with the different ‘options’ that would help them build a future – that I decided to pursue the MBA degree. A dilemma that exists in most of our minds is that between a management degree from abroad versus that from within India. There is no end to this debate, but since I belong to the latter group, I would describe the process of getting through that in this piece of writing.

There are different exams held for the admission to a management institute in India, the popular ones being the CAT, the XAT, the NMAT, IIFT, exams specific to colleges, and so on. A gateway to the premier Business Schools of the country, the CAT, as an exam, does not really need an introduction, so I’ll skip that part. I’d rather use this space telling you what the different phases in the process of doing this exam are.

      1.  The Initial Phase

As one would expect, there are different ways to go about this. People can choose to do absolutely nothing, or study on their own selves, or join a coaching institute. If in the second category, I would suggest an aspirant to pick up study material from online/reliable offline sources. Trust me there is no dearth of either. However (and this opinion is strictly personal), I have always felt that the CAT requires not only a basic and complete knowledge of the relevant material for quantitative, logical and verbal ability, but also a grasp on the tips & tricks that could help accelerate one’s speed to solve.

My guides, both in terms of the preparation material and the teachers, came from the coaching institute I was enrolled in. And I genuinely believe that someone teaching me a particular concept would make it clearer to me, as compared to my reading it from a book. However, one is his/her own judge of what works best for the purpose of learning. Hence, the most important part in this phase is for an aspirant to pick the category that suits best.

Incase one does plan to join a coaching institute – honestly, there isn’t much of a difference between the names that exist in the market today. All of them have material and test series which are comprehensive. Thus, I would suggest to the aspirants to take advice from their seniors who must have attended such classes. Based on what they say (take views of students from at least two different places), make the final decision.

      2.  The Preparation Phase

Personally, my preparation was at the coaching institute I joined. However, for almost everyone I know, it is actually during the summer vacations when people put in their best effort to study. Personally, if I look back, I see that those two months were quite intense, and it was my coaching faculty who guided me through most of what I did. What is important in this phase is to identify the areas where one needs work and hence polish those well. There is no key to this, but to practise – regularly and efficiently.

As the end approaches, it becomes extremely significant to practise as many mock tests as possible. Also, practicing the CAT papers of the past five to ten years can be extremely useful. This serves a dual purpose – one of making the aspirants familiar to the exam pattern and the other of helping them learn how to manage time. Taking a step forward, it is more important for one to analyze mistakes post a mock test. Though this part is more time consuming than taking the exam itself, it ensures the avoidance of the same mistakes in future.

      3.  The D-Day

First, different myths float when one tries to choose a date – of the exam being easier on weekdays than on weekends, of taking the exam on a particular day, etc. – all of this, yes, ALL of it is absolute crap. Nothing such is true. The exam is such that there is a large common pool of questions designed each year, and questions are pulled out from this pool everyday in random combinations to form a question paper. Hence, one can never predict the difficulty level of any particular day or time slot.

Second, aspirants should make sure they look at all the 30 questions in each section. At various instances, the questions in the beginning tend to be difficult compared to the ones later in sequence. Thus getting stuck at initial questions can lead to very negative outcomes.

Third, keep calm and get done with the exam.

      4.  After the declaration of the results

Once the results are declared, successful aspirants get calls from the different business schools. The last step in the process entails preparation for the GD/WAT processes and the PI – i.e. the Group Discussion, the Written Ability Test and the Personal Interview rounds. The key to succeeding here would be to know two things well – one’s own resume and the current affairs. Infact, reading the newspaper is a habit that one should try and pick up early – since it also is helpful in the preparation of the verbal section of the CAT.

Like conventional CAT preparation pieces, I don’t want to end this article by stating a list of which business schools are the best in the country. One can easily Google and find that out. Rather, I would like to put forth the idea that it is important to think through the direction in which life is taking one. And whether it is a job, a master’s degree or an MBA – make an informed choice, one that you really want to do! All the best :)

Suhani Popli graduated from St. Stephen's College in 2013. She scored 98.2 percentile in CAT 2012 and is currently a student at IIM Kozhikode.

Friday, 19 December 2014

Masters In Economics - Where to go?

The Inside Story

By Anshuman Kamila

Without much ado about nothing, I’ll get to my primary task. I am supposed to draw points of comparison between the several institutions of prominence for study of Masters in Economics in India. So I’ll try and cover as many perceptions and as much information I could manage to gather regarding these. Since much of the historical foundations of these institutes are accessible easily, I’ll take the liberty of skipping these and focus on contemporary perceptions and matters of fact.

South Asian University (SAU): “The new core for core economists!”
OPINION: Based on interaction with senior faculty of the University and friends of faculty, one can advise to keep it as an option right below or above JNU. The syllabus is in line with the one covered at Delhi School of Economics (DSE), albeit at a level a tad lower than at DSE. In the last semester, a student is supposed to submit a dissertation towards the fulfillment of the requirements of the course. This, paraphrasing a senior functionary at SAU, “is the forte of the course where a student is urged to have an independent thinking and research into a subject of choice and serves as a timely initiation into a career in research.” Certain key members of faculty are well net-worked, and a rapport with them may guarantee an enviable internship.

ENTRANCE PREPARATION: The entrance to this fledgling University happens earliest of all. The syllabus is roughly the same as a standard entrance examination syllabus, going by hearsay conjecture and personal gut feeling. It’s relatively easy to get through, if one were to go by the level of questions asked in the past years. The trick is to have some native intelligence and be on terms with last two years of undergraduate syllabus of Economics (H) at DU, through means of a cursory read. 

Jawaharlal Nehru University (JNU):  “The melting pot of thesis and antithesis”
OPINION: A temple of learning, rather than mere ‘training’, JNU emphasizes critical thinking and encourages developing an opinion of one’s own. The course coverage is, unlike DSE or ISI, focused on analyzing contemporary world economy against the back drop of conventional theories and schools of economic thought. Also the teaching accommodates heterodox economic thoughts, so not only a particular string of economic thesis – but its anti-thesis and subsequent synthesis are all discussed. If developing a scientific temper and the power of informed criticism is one’s objective, JNU is the place to be. The syllabus for the entrance is hugely diversified. It is difficult to pinpoint certain sections which will ‘surely’ be asked. The entire system, beset with opaque reservation systems and grace markings, is very unpredictable and remains a gamble. It is not advisable to write this exam ONLY, for there is no guarantee of making it despite a sound base in economics and a rigorous practice of the past year papers.

Placement record is not so good, although it has improved in recent times. A concerted effort in putting together the semblance of a ‘placement cell’ has been started last year and results are showing – students are getting well paid internships. But placements so far have been confined to academic sphere alone – research associate-ships and small time analysts, et al.

Indira Gandhi Institute of Development Research (IGIDR): “The exotic hub of economics”
OPINION: This elite research institute sits atop a picturesque hill and infrastructure is a primary attraction (as one of my professors pointed out, ‘they have a great swimming pool’ and my batch-mate there tells me a wildlife hotspot and the film city are nearby!). A small batch size and a student faculty ratio, which almost equals 1:1, are important points of consideration. Teaching level is at par with DSE, from what one infers on basis of assignments and questions asked in tests. Some of the subject’s leading stars serve on the panel of faculty, thus one can be assured of rigorous teaching and cutting edge research experience. A unique distinguishing feature of the institute is assignment of a ‘mentor’, the pool of which is drawn from the panel of faculty and research scholars. Every mentor is mandated to advise and motivate a scholar and remains easily approachable through the three years of college life. All members of faculty reside on campus, creating a sense of bonhomie and occasional parties at their homes add to the academic ambience.

ENTRANCE PREPARATION: The entrance test is a salad bowl of economics (no calculations here, so stress is on robust understanding of fundamentals and uncanny ability to ‘reason out assertions’), arithmetic and verbal and non-verbal reasoning. Maintaining cool throughout the duration of the test is the only sensible advice one can give. Interviews are usually grueling and grilling, and intrinsically unpredictable. So a lot of scope of surprises here, although confidence in answering and being thorough in subjects of preference should put one in good stead. 

Delhi School of Economics (DSE): “The corporate hotspot!”
Of course, the most sought after destination for study of Economics at Master’s level in India. Boasts of an expansive galaxy of distinguished alumnus and remains a favourite catchment area for all big corporate recruiters. The pronounced use and application of mathematics in all sub-branches of economics remains a central theme of ‘training’ at DSE. Faculty members are almost household names (of course, households that are comprised of economics scholars!) The level of instruction right from Day 1 is at an elevated level, even for someone who’s had a relatively grand run at Undergraduate level. The first two semesters are usually times when the newly inducted scholar is acquainted with the rigour and tenor of academics at DSE, so they tend to be tougher and seem drab. However, after one has successfully steered cleared of the wee semesters, one can hope for some stimulating economics.

Indian Statistical Institute (ISI): “A researcher’s paradise!”
Perhaps the only institute that is in direct ‘confrontation’ with DSE to lure away the brightest undergraduates in Economics. Apart from boasting of a dazzling array of academicians on its faculty panel, the allied Rs 5000/- monthly stipend and a top-up of stationery grant is a pecuniary attraction. With a batch size of one-tenth of that at DSE and being fully residential (co-ed, by the way!), it makes for an ideal destination for much-involved academic study. The infrastructure is geared towards fostering a healthy and conducive environment for serious scholarly work. The computer lab is open 24 hours and fully air conditioned, providing a much needed cooling-off spot for scholars in summers. Certain members of faculty are extremely solicitous of scholars’ well being and offer to help – in numerous ways, like writing influential recommendations, providing relevant and pertinent guidance for further study, etc – of their own accord. You often tend to share meals and badminton and tennis courts with professors; that just deepen and strengthen the academic bonds you forge with them.

Why DSE over ISI? Well, this question has been put to me umpteen number of times. So a well considered reply is in order. Here it is:

From my interaction with people at DSE and ISI, the gut-feeling one develops is that ISI is best suited for someone who plans to cruise the research highway (or i-way, if you like!) while DSE is a haven for anyone who’s as yet undecided about putting in hard labor in economics. That is not to say that ISI doesn’t offer tantalizing corporate packages (truth to tell, the onus and hence the choice lies with the student body at ISI to invite which companies they wish to apply to; with such a small pool of highly skilled applicants, companies are more than willing to hire and almost everyone gets their preferred pick.) or DSE doesn’t send scholars to Ivy League varsities for higher studies (as one esteemed researcher-professor at DSE apprised us, DSE sends students to Ivy League varsities ranked higher than those attended by scholars from ISI). 

That said, I felt, and had my belief corroborated by a senior academician in the economics circuit, that DSE offered more diversity in subjects and specializations. Even in interests of research and conversation, DSE campus offers greater variety than that available at ISI – simply because 200+ students will offer more diversity than less than 30 students! Also, that DSE houses the Departments of Commerce, Geography and Sociology, offers scope for a multi-disciplinary approach to any given theme of conversation and interaction.
I’ve dined at ISI, with members of faculty. The nature of dining-table conversations is usually a proximate way of gauging the perspectives of individuals and the institution they constitute. Their way of looking at any issue – be it the merger of Air India and Indian Airlines, or the (f)utility of new universities that sprung up recently – is one of extending an established economic theory to analyzing the issue at hand. This may seem very appealing to some, and precisely for them, ISI will be a preferred paradise. 

In summary, I chose DSE over ISI for the sheer diversity of interests of my prospective classmates (which turned out to be true), for the fact that DSE sits in the midst of the vibrant college life of Delhi University and that DSE is a prudent linear combination of academics and amiable social life, and I have convex preferences in this regard! 

Anshuman Kamila graduated from St. Stephen's College in 2014. He was the topper of the batch and got admission in DSE (By merit and entrance), JNU, ISI, IGIDR and SAU. He is currently pursuing MA in Economics at Delhi School of Economics.

Monday, 8 December 2014

Getting Started (DSE Entrance)

By Akshita Goyal

Hello everyone!

Considering that you all are just a semester away from your DSE entrance exam, I write this to give you few tips to crack the examination.
DSE entrance is one of those where each question is a dreamerger of economics and maths. So the best way to get a feel of the exam is through the past year papers. They are the best indicators of how tough or easy any question can get.

Frankly, I started with the past years and ended with them. Instead of going over all chapters you did in the past three years, I suggest the following steps:
1.Try out some past years and you may realise that you don't actually remember many concepts and formulae!
2.Go back to specific chapters concerning the questions you couldn't attempt  and spend quality time on them. A productive way to test your mettle after revision would be to redo the questions.
3.You can now tally your answers with the correct options given. I would personally suggest that you do not look at solution booklets and instead wrack your mind(even if it takes a day or two).
4.I gained a lot by discussing questions with my friends. We would argue over our own answers and in the process cover our weak areas.

It is just a game of regular and persistent practice and little bit everyday is an ideal way to go about it! Now, some important (necessary but not sufficient) chapters that DSE paper setters just completely adore:

1.Maths
•Set theory
•Probability
•The mean value theorem and others.

2.Microeconomics
•General equilibrium(This year we had lot of questions based on this, maybe because it covers both consumer and producer theory)
•Game theory (the 2013 paper has quite a few on these)

3.Macroeconomics
•AD-AS Framework and IS-LM Model(so, here they give you a set of 6-7 questions that are linked)
•Solow model
•Theory of money( this includes formulae like money multiplier etc.)

4.Statistics and Econometrics
I club these two subjects together because they are interdependent. Everything here is important for questions on these test almost every topic in it.

Lot of advice it seems! For those who wish to do masters, it is definitely a long wait but let it not affect you too much. I remember that my friends and I would sit for hours in the mess joking about the difference in the kind of papers each institute sets. Some of us remembered the correct options by heart! ;)
In the end, if you enjoy your preparation, you will definitely be able to pass it off well.  Because if you cherish the journey, the destination won't seem very far. Garner your preparation with confidence and a calm mind! Now, you are ready to attack the entrance!
In case of any queries, you can comment on this post, I shall try my best to help you out.

Bonne chance! :)

(Akshita Goyal graduated from St. Stephen's College in 2014. She got Rank 3 in DSE Entrance and was awarded Prof. Manmohan Singh Scholarship. She is currently pursuing MA in Economics at Delhi School of Economics)