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 (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  :) 

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:

•Set theory
•The mean value theorem and others.

•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)

•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)

Monday, 25 August 2014

Coaching – to join or not to join?

A big question that irritates final year students preparing for econ entrances is whether to go for coaching or not.

In our opinion, there are three kinds of students:

Type 1: Those who have gone for coaching since ages, and think that coaching is the raison d’etre of cracking any entrance. Afterall, how on earth could you even think of getting through ISI, D-school without coaching!

Type 2: Well, they will avoid coaching but will definitely go for test series preparation because they think they will not have enough practice till the D-day without that.

Type 3: These are mavericks –  have always been conscientious learners and have studied every single topic in their normal undergrad coursework with a religious sincerity. Joining coaching? ‘Nah, that’s a mad rat-race merely’, they would say.

At Eurekawow, we have talked to people and explored how beneficial coaching really is. We understand that taking a stand and NOT going for coaching when all your peers are going for it, can be a stressful decision. It may harm one’s self esteem, destroy confidence and even ruin one’s final exam day. We also acknowledge that not everybody may be financially strong enough to afford the best coaching centres in the city.

The good news is this: well, the best of best coaches say that there is no substitute to practice. If you are sincere enough and practice enough, there is no dearth of practice materials online now that can become a roadblock in your way. You will find the answer keys to all past year DSE and ISI question papers on Mr. Amit Goyal’s pubic website here:

That is quite generous of him, in fact you should take time to explore the entire website and follow the guidance.

You can in fact, start trying your hand at some of the DSE first sem problem sets available here:

They are quite do-able with your third year brains.

Aleesha Mary Joseph (first year student at DSE now) who attended Amit Goyal’s coaching centre tells us that he is an amazing teacher who has great conceptual clarity and communicates it across students excellently. Although his fee might look disheartening at first, but the value of his teaching far exceeds the cost. So, it’s a fair deal essentially.

Apart from that, AG’s entrance classes are known to have positive externality on learning at the masters level. His preparation material is of the masters level, so you end up feeling more comfortable with the onslaught of advanced material, once you enter D-school or ISI after having been coached by him.

But that said, this does not in any way prove that coaching is a necessary condition for clearing the entrance. Since a lot of learning material is publicly available on his website and links to texts are also available, world is not that dismal a place really.

If you are smart enough to use the internet to your advantage, you can get your hands on oceans of material to help clarify your concepts and make yourself ready for the exam. You can check previous posts on this blog by people who cracked the entrance without any coaching.

Although, there might be topics where you feel significant gaps exist and not enough material can be dug from google or youtube – well, that is where the opportunity lies. Start early, read every single book on that topic, ask all your teachers about it, post it as a query on AG’s website, write him an email, post on Eurekawow facebook forums about it --- until, until you land on it finally. Its certainly a long route, but if you really want to specialise in the field in the future, there are no short cuts and you will receive your payoffs soon.

We can vouch for it, the sense of discovery will be priceless after all that toil and you will never forget the concept or the answer to that tough question in your entire lifetime (Alzheimer’s patients may be an exception though).

To sum up:

Take a call based on your financial and cerebral constraints.

Don’t just follow the herd.

Follow your heart.

Hope this helps!

Much love,
Team Eurekawow

(Posted by J Kaur)

Sunday, 25 May 2014

DSE - Few days before entrance exam - Tips!

By - Sneha
Sneha graduated from SRCC - Batch of 2013. She got Rank - 1 in DSE entrance last year.

Dear friends,

I would like to share my experience of The Delhi School of Economics entrance exam preparation with you all. Hope this will help you to prepare more strategically for the exam given the fact that not much time is left now..

The first thing that I did once my college exams got over was to start with the DSE past year papers and I did almost all the MCQ questions of the past years irrespective of how old they were and whatever pattern the old papers had.  The key to learning at this point was to do the papers in a time frame of 3 hours, verify the answers and discuss the doubts with friends. A lot of you might find it exhaustive to do all the papers in a go, as even I did. But then some of my friend would call me with a doubt say in ques 6,10,23 of some past year paper and I'll think.. Why not do the entire paper and discuss my doubts with her.

This way I ended up doing almost all the papers by the exam day. This is also where a common concern of most students 'what is the syllabus?' gets answered. You also know by the end of it that what are the topics you are weak at and need to revise, or what are the important topics to redo from your undergraduate syllabus.
For those super fast students who have already done the past years (and I was surely not one of them) very good! .Now help your friends do theirs by solving their doubts. This will help you revise as practicing questions till the final day is very very important to keep you fast and accurate.

While doing this practice and more importantly when giving the final exam, one thing that happens with EVERYONE is that you get stuck on a series of questions. That is you are either not sure with the answers or just not able to do a lot of questions one after the other. This is where lies the real test that you don't panic and move on calmly. Even I got stuck on some questions in the exam. My strategy was to open some other page and do a fresh set of questions. Gradually I gained momentum and confidence, and lo! even the questions I was stuck on seemed easy now. So it's a test of how you stay calm when the clock is ticking and making you nervous. I always tried to tell myself that this is another practice test that I have to do well.

Another important tip is to keep marking the answers on the OMR sheet either after each question or after a set of 5-10 questions. This is one mistake I observed that many people did and lost marks later. They left the final marking for the end and then never got the time to mark all the answers even though they had attempted a lot of questions correctly.

Please be confident in whatever you mark and by the time you sit for the exam, you'll have a fair idea of your own accuracy level. So attempt accordingly. Try multiple ways to answer the same question if possible, this will ensure that the answers are correct. What matters in the end is the  number of CORRECTLY answered questions, not the number of attempted questions.

One last thing that I am sure a lot of people want to know.. That what is the cutoff! To all those, even though it's natural to have such questions but to be honest this question has no answer.. Your aim should be to give your best irrespective of what the cutoff is. The entire procedure is relative and selective studying is not what I would suggest. For those who have dearth of time,focus on your strengths and improve upon your weaknesses to the most. You never know how well your peers performs.

Hope I have answered most of your questions!
All the very best. Do well and do sleep well on the night just before the exam. Your presence of mind and mental peace is very important in those three hours. Be very confident and tell yourself that I know it all ! I will do it best.

With best wishes,