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)

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.

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)

Preparing to study at LSE (London School of Economics)

By Pankhuri Tandon

Securing an admission at the London School of Economics and Political Science is a matter of both good performance and good timing. The application for MSc. Economics requires the following:

1.        GRE
2.        2 academic recommendations
3.        Marks
4.        Statement of Purpose
5.       Resume’

1.  GRE: The Msc. Economics programme of LSE requires its applicants to submit a GRE score. This GRE score should not be more than 5 years old. The MSc. Economics program at LSE gives more importance to your score in the Quantitative section of GRE than your score in its Verbal Section and Analytical Writing Section. LSE has explicitly mentioned that for securing admission into the one-year Msc. Economics program, the applicant should score above 160(out of 170) in the quantitative section. For the two-year MSc. Economics program, they require a score above 163 in the quantitative section. So make sure you manage to cross this ‘cut-off’ in the quant section of GRE.

 You should aim to give GRE before October. This is for 2 reasons:

a)      The quicker you give GRE, the faster you complete your LSE application. You should aim to finish your LSE application before the first week of January (I shall explain reasons for this later in this article). Note that you receive your official GRE score 15-30 days after the date you have given your exam.

b)      If you are not satisfied with your GRE score, you can give the exam again, but only 21 days after your current exam date. So make sure you keep that margin.

Also, it is important that you have your passport made before you give GRE, as the exam centre only accepts the passport as a valid ID proof.

2. Recommendations: You need to have two recommendations from the teachers who have taught you in college. You do not need to send the recommendation letters in your application; you just need to provide the name and email addresses of the teachers who will write recommendations for you, and LSE will contact them itself. Still, you need to ask the teachers for a reference as soon as you start with your LSE application, because they take time in writing them. Teachers have a lot of preoccupations already, and as the month of December begins, more and more students start with their application and come to ask them for recommendations. The only thing that delayed my application till mid-January was a recommendation that was not sent by my referee. Make sure you keep reminding them to write for you!

3. Marks: Marks in your undergraduate course is the most important criteria for selection at LSE. For MSc. Economics, LSE requires you to score at least 70% (aggregate till the final year) in your undergraduate course. Moreover, LSE gives a lot of importance to your score in maths, statistics and econometrics at your undergraduate level.

4. Statement of purpose (SoP): Although your marks and references are given the highest importance in you LSE application, statement of purpose is an essay (1000-1500 words long) through which the admissions committee analyse your thinking, and your suitability for pursuing the course. A SoP should clearly articulate why you want to pursue the course in that institute(why particularly in that institute?) , and why you have the right aptitude for the course. For this, not only do you need to describe the abilities you have that will help you in the course, but also show that your thoughts and views are consistent with what you are going to study in the course. Make sure your SoP doesn’t look like your CV in prose. It should explain how the things you did till now were with a purpose of helping you in what you are going to do now (the postgraduate course), and how the course you are going to do now will help you in your ultimate goal of the future.

Deadlines to be followed

Although there is no deadline for applying to MSc. Economics at LSE, the seats get filled quickly. Also, most scholarships require you to have an admission offer before you can apply to them. Typically, the deadline for the scholarships is in the period of February-April. So try to obtain the admission offer by January-February. Moreover, LSE usually takes 8 weeks to process your application, so it is best to send your complete application (including recommendations) by December.

Scholarships

The most well-known scholarships are Inlaks Scholarship and Commonwealth Scholarship. LSE also provides scholarships, under its Graduate Support Scheme. Moreover, this year LSE has announced 50 new scholarships for Indian students! :D  There are also organisations like J.N. Tata Endowment and Narotam Sekhsaria Foundation that offer loans at nil or low rates of interest. I advise that you should try to obtain funds from as many sources as possible rather than concentrating your energy on just one fully-funded-scholarship. There are many small scholarships that just escape our attention. Make sure you keep checking regularly in newspapers and online about any new scholarships.

Each scholarship application requires as much effort as one application for admission into a university. Most scholarship applications need a statement of purpose and recommendations (2-3). Note that you can get a recommendation from a teacher only a limited number of times (usually 4), so make sure you manage your ‘profile of recommendations’ from different teachers well. Many scholarships ask you to describe how you will arrange your funds for pursuing the course abroad. My sincere advice is: please describe it as honestly as possible. Trust me, being honest will increase your chances of getting that scholarship.

(Pankhuri Tandon graduated from St. Stephen's College in 2013 and is currently pursuing Economics at London School of Economics. If you have any queries regarding LSE applications, you can leave a comment below)

IGIDR (Test and Interview)

By Sakshi Gupta

IGIDR entrance has two stages, a computer based entrance examination and then an interview for the shortlisted candidates. The level of the examination is in colloquial terms, “manageable”. There are four sections in the paper-

1.  Comprehension, Reasoning and Analytical ability

2. Basic Mathematics

3. Economics

OR

4. Advanced Mathematics

(To pass the exam one has to pass all individual sections.)

Section 1 includes reading comprehensions, vocabulary, rearranging jumbled words, analytical reasoning etc. preparation for which can be done from any book containing these sections that one can get their hands on.

Section 2 has the 10^th-12^th level mathematics’ questions. Revising these concepts is essential because the questions are facile but at the same time convoluted if one doesn’t recall the concepts (LCM/HCF, integration, limits, polynomials, relative speed etc.)

Section 3 is a better option for economics’ students as the questions can easily be done if one is comfortable with the undergrad syllabus. There is nothing really to worry about the economics section, it has (mostly) direct questions from the syllabus. Those preparing for other examinations DSE, ISI, JNU etc. shouldn’t essentially need separate preparation for the IGIDR economics section. The same practice material should suffice. The sample questions can be obtained from http://www.igidr.ac.in/newspdf/msc-infhandout.pdf

However, it should be made sure that one is comfortable with the online pattern of the exam for which the sample is available on www.igidr.ac.in . It is important to go through it once before the exam so that one can concentrate on solving the questions rather than struggling with the computer during the examination.

Note: The pattern of the paper given above is for 2013 and is liable to change, so be sure to check the website for the pattern of the examination.

The second stage is the interview. Here again what one needs to be sure of is her/his basics of economics. A typical interview would last for 15-20 minutes. The first question asked in the interview is generally ones favorite subject in economics, and that then becomes the basis of the interview (so be very sure of what you want to say). However it is not essential that they stick to your chosen subject throughout but most of their questions come from there.

Some of the questions that were asked in the IGIDR interview were:

What is consistency? What is heteroscedasticity, how do you detect (tests), its consequences and correction methods? (Econometrics)

Explain the income and substitution effects (through a diagram on the board) when the price of one good out of the two given goods increases. (Microeconomics)

What do you understand by PPP (purchasing power parity), UIP (uncovered interest parity) and CIP (covered interest parity)? (Macroeconomics/International Economics)

Draw the graph of xǀxǀ (Mathematics) etc.

The interview is not going to be very tough so be calm and confident, even if one doesn’t know the answer to a question don’t panic because there are more questions to come. While answering, try to be precise and clear e.g. the answer to what is heteroscadasticity could be the problem of unequal error variances i.e V(u) is not a constant. Similarly for consequences, mention lost efficiency first (unbiased, linear are common consequences for all and thus they wait to hear lost efficiency).

This is not at all the hard and fast rule, everybody has their own way of dealing with interviews and it is fine as long as you are confident about it. Just remember to brush up your basics before you go for the interview and rest should be fine! :)

(Sakshi Gupta scored 85.2% in B.A. Economics (H), Batch of 2013, from St. Stephen's College. She is currently at DSE. She cleared DSE, ISI, JNU and IGIDR entrances. Post your queries as comments below.)

Tips for preparing for DSE entrance

By Orville Dustin Mondal (Rank 7 in DSE entrance)

The most important thing about preparing for the DSE entrance test is continuity. You need to be completely comfortable with the recommended course material (which, for DU students is basically second year stuff, under the older course)-emphasis on 'COMPLETE'. Because only when you're comfortable with it can you go on to the practicing bit of preparing. Trust me it's extremely annoying (not to mention disconcerting) when you're doing a question and you start thinking,"do I know what they're talking about here?". Once you're through going through the course content, which really doesn't take too long, you need to start questions (yeah, I know that's obvious) and this is where continuity comes in. You need to get your hands on as much practice material as you possibly can. This is especially important for those of us who have a burning, unquenchable desire to keep on at it with economics but just don't seem to have that natural knack for solving essentially simple but convoluted questions. And truthfully, DSE mainly throws out things that we do know how to do. Sure there's the odd instance where they decide to dig through a masters textbook on stats and fling us something we more or less have no chance of figuring out-but that is extremely rare, not to mention ultimately inconsequential (one question should not stand between you and the cut-off). 

Where does one get material from? Well the past papers are a great way to start. Trust me there'll be more than a few head scratchers. The papers get you into a certain way of thinking about the questions. Our university exams are pretty straightforward (not just DU, by the way) and DSE most definitely (usually) is not. You need to have a tiny idea of what to expect-the papers are an excellent primer. But beyond that, your options are limited unless you enroll in one of the (way too) many coaching classes spread around the city (or, alternatively, you could have an inside source that gets you the material). Classes aren't always helpful. Seriously, they aren't for everybody. Nor are they necessary for everybody. Blisspoint or Ecopoint (they're these two places that offer classes, in case you didn't know), all you need is material. You need questions. Get them. Get a lot. How you get it is of course more problematic. Just don't go around dropping small fortunes hoping for the ideal stash of exam info (case in point, Mr. A. G., while no doubt an extremely helpful and, perhaps, likable person, cannot guarantee success. Self help is very very important). Don't strategise and leave out this or that subject. The course DSE recommends for preps isn't magnificently vast and you can easily practice for all of it. 

Finally, you need a solid p2p network. Peer support is unbelievably helpful (believe me). I only had it for the last 9 days of prep and it was frustratingly fantastic to see how others could solve stuff I had been stuck on for weeks. The entrance is, to put it mildly, manageable. It doesn't take an insurmountable mountain of work to be confident enough to take it and do good in it (okay, maybe I'm being a little pretentious here). 

So, in the end, all you need is to know the core subject content, have lots of material to keep you busy for about 3 months of more or less sincere work, and a strong peer support network. 

Orville graduated from St. Stephen's College in 2013. He got Rank 7 in DSE entrance and is currently pursuing M.A. Economics at Delhi School of Economics.

Cracking GRE

By Shruti Lakhtakia

The Graduate Record Examination is required by most universities in the UK and the US as a part of the application material. A note for those who are pursuing finance based courses - the GMAT is sometimes allowed in place of the GRE, make sure you check the requirements of the particular course and university you are applying to.

Ideally, you should plan to study for an optimum six-eight weeks before taking your GRE. The test itself consists of three sections - Analytical Writing, Verbal and Quantitative. It is a good idea to begin by taking a diagnostic test (available in most books) that will give you an idea of where you stand. My recommendation would be to begin with a general book (Princeton Review, The GRE Official Guide by ETS, or Barrons), which clearly lay out the entire test - its structure, the kind of questions, and basic concepts used in each section. After doing one or more of these books, you could begin to go through questions in the Princeton Review book of 1000 Questions, which has several drills arranged topic-wise. Simultaneously, you should begin to work on specific sections that you are having difficulty with. Some people find the Verbal section difficult to deal with, others the Quantitative section. Depending on what your relative strength and weakness is, look for a book that is specifically directed at your problem area (published by Kaplan, or Barrons).

The more practice tests you do, the better it is. I believe that the GRE is more a test of how you manage your time and how well you work under pressure, than anything else. Start practice tests (I recommend online tests, but begin with the basics - use the tests given in the books first) when you have about three weeks to go for the exam. But then again, time it well so that you have sufficient time to practice - so if you have an important event or test in college, plan accordingly. Another important tip would be to remain consistent with all your sections, primarily Verbal and Quant. Even if you are super confident about being able to tackle one section, do not neglect it completely. Being in practice close to the exam is important.

Improving your vocabulary is an important part of the GRE process, so start early. The more you read, the better your vocab will get. If you don't have sufficient time, then look for an appropriate word list on the internet (I used the Barrons word list), and work through it systematically. Be sure you know the words that turn up frequently on the GRE - these are the words you see all the time on practice questions: you know you've seen them before, but can't remember what they mean.

Lastly, as I said before, time management is the key. Start early. Plan for the test keeping in mind all other engagements and activities that you will be undertaking simultaneously. The GRE is not tough. It is tricky in that you must be crystal clear with concepts, and you must manage your time wisely - both before, and during the test. Good luck!


Shruti Lakhtakia graduated from St. Stephen's College in 2013. She scored 334/340 in her GRE exam. She is currently pursuing Masters in Development Economics from Oxford. 

How to prepare for DSE entrance (Delhi School of Economics)

Dear all

Delhi School of Economics entrance will basically test your knowledge of Microeconomics, Macroeconomics, Statistics, Econometrics and Mathematics.

At the time of applying, you need to select between Option A and Option B. You make a choice based on your major during the under-graduation. Students of Economics Honours opt for A, whereas those of Mathematics Honours opt for B. (I do not know of students from other streams applying to DSE for a Masters in Economics, so if you’re that exception, and are reading this blog, please look at the past year papers and see which subject you’re more comfortable with- Economics or Mathematics, and make a choice accordingly).

For lack of much knowledge about Option B of the entrance examination, I’m going to stick to elaborating on Option A (Which is the one that I appeared for).

Past year Papers

Option A Paper 2009

Option A paper 2010

Option A Paper 2011

Option A Paper 2012

1.      PATTERN OF THE PAPER

The paper consists of 2 sections.

Section 1: 20 multiple choice questions

Marking scheme: +1 for the correct answer, -1/3 for a wrong answer, 0 for unattempted question

Section 2: 40 multiple choice questions

Marking scheme: +2 for the correct answer, -2/3 for a wrong answer, 0 for unattempted question

2.       ADDITIONAL RESOURCES

I have heard of the following two coaching institutes/tutors:

i)                    Amit Kumar Goyal

ii)                   Eco Point

Ps. I attended Amit Goyal classes. He charges Rs. 50,000 for around 25 classes. He covers microeconomics, mathematics and econometrics/statistics very well. However, he takes only one class for macroeconomics, which means you will have to prepare that subject pretty much on your own.

Why I chose his classes?

i)                    He’s organised. Every class is of 7 hours which are divided as follows: 10am-1pm he teaches, 1pm-2pm is lunch break, 2pm-5pm he gives us a test to solve (which is more like an assignment, ie. you’re allowed to form your own little group and think about the problems), discusses the test and also takes any doubts that you might have

ii)                   It’s conveniently located. Until last year, he used to take classes at YWCA (10 mins walk from Patel Chowk Metro Station)

3.       BOOKS YOU MAY USE

Microeconomics: Hal Varian (Intermediate Microeconomics), Hal Varian Workbook, Osborne (for game theory), Nicholson and Snyder (for production theory), Gregory Mankiw’s Principle of Economics (for microeconomics if you need to strengthen your basic concepts), Bernheim Whinston (reference text for comprehensive explanations of topics if needed)

Macroeconomics: Dornbusch and Fischer, O. Blanchard, Development Economics by Debraj Ray (for Solow and Harrod Domar growth models)

Or you can just pick up the reading prescribed by Delhi University for the 2^nd year students of the annual examination mode- this would be the best rather than trying to read from 3 different books.

Econometrics and Statistics: Gujarati’s Introductory Econometrics, Degroot and Schervish

Mathematics: Sydsaeter and Hammond

Photocopies of the required portions of the above mentioned readings used to be available at the DSE photocopy shop until the previous academic year. With the new piracy raid, I’m not sure if they will be available any longer. Contact your seniors for their readings, if you fail to get them at DSE, I suppose. Those going for jobs or MBA’s should surely be willing to part with theirs.

4.       TIPS FROM PERSONAL EXPERIENCE

i)                    Solve as many past year papers as possible (starting from the year 2004). In this year’s DSE entrance examination, atleast 10 questions were lifted straight off from the past year papers, word to word, figure to figure. I answered all of those within a minute, and save a whole lot of time for the harder questions. Additionally, past year papers are diagnostic tests of sorts. Based on the questions you’re unable to answer, you will get the exact idea about which areas you need to practice most.

ii)                   ‘General Equilibrium’ is given a lot of weightage in the examination. There are certainly going to be atleast 3 questions in section B from that topic, so make sure you practice it well (numerical as well as theory)

iii)                 Do not forget to take a pen, pencil, eraser, and CALCULATOR on the day of the examination. Take some energy drink (anything with glucose) for refreshment.

iv)                 Do not try to judge yourself before the examination. Remember, you’re as good as anyone else. Be confident, and make sure you go inside the examination hall motivated to think and apply your brain. You may have never solved the probability question that you see in the paper (although I can assure you that you would’ve seen a variant of it in the past years  :P), but that should not mean that you will not be able to crack it if you spend 2-3 minutes to think about it.

v)                  Do not make uncalculated guesses. Remember, you’re negatively marked for each wrong answer.

            If you have any queries, post below as a comment. You can also mail it to Vaishali Garga at vaishaligarga@gmail.com.

Regards,
Vaishali Garga

            Vaishali Garga is an economics graduate from St. Stephen's College (Batch of 2013). She got Rank 19 in DSE entrance this year. She also got admission offers from London School of Economics, Oxford and Brown Universisty.