UPHESC Assistant Professor Economics 2025 PYQs

Concept: Amartya Sen received the 1998 Nobel Memorial Prize in Economic Sciences "for his contributions to welfare economics".

1. His prize-winning work covers social choice theory, poverty measurement (Sen index), famines and entitlement, and inequality.
2. Development economics is closely linked to his later capability approach, but the citation itself says welfare economics.
3. Econometrics (Frisch–Tinbergen 1969) and monetary economics (Friedman 1976) are other laureates' fields.

Short trick: Sen 1998 = Social choice + Sen index = Welfare economics.

Concept: Under perfect competition in both product and factor markets, a firm hires labour until W = VMP_L = P × MPP_L (= MRP, since P = MR).

1. The firm compares the extra cost of a worker (wage) with the extra revenue he brings (P × MPP).
2. Hiring stops where the two are equal; in equilibrium W = VMP = MRP = ARP (long run).
3. Subsistence wage is the classical/iron-law idea, not the marginal productivity result.

Short trick: Perfect competition: W = VMP; monopoly in product market: W = MRP < VMP.

Concept: Break-even point: output at which TR = TC, so profit = 0 (no profit, no loss).

1. Below it TC > TR (loss); above it TR > TC (profit).
2. Break-even output = Fixed cost ÷ (Price − AVC), i.e. FC ÷ contribution per unit.
3. Split-off point is a joint-cost term; point of inflection is where a curve changes curvature.

Short trick: TR line meets TC line = 'no profit no loss' = break-even.

Concept: The law of demand (inverse price–quantity relation) holds 'other things being equal' (ceteris paribus).

1. Assumptions: consumer's income, prices of related goods, tastes and preferences, credit/expectations and population remain constant.
2. Options (B), (C), (D) speak of a change in these factors – that would shift the demand curve, so they are not assumptions.
3. Only (A) states a ceteris-paribus condition.

Short trick: Law of demand = price changes, everything else unchanged.

Concept: A horizontal demand curve means perfectly elastic demand: e_p = ∞.

1. At the given price any quantity can be sold; a tiny price rise makes demand fall to zero.
2. This is the demand (AR) curve facing a firm under perfect competition.
3. Vertical curve → e = 0; rectangular hyperbola → e = 1.

Short trick: Horizontal = ∞ (perfectly elastic); Vertical = 0 (perfectly inelastic).

Concept: MP = d(TP)/dL, so TP is at its maximum when MP = 0 (end of stage II).

1. MP maximum → point of inflexion of TP.
2. AP maximum, where AP = MP → end of stage I.
3. After MP becomes negative, TP falls (stage III).

Short trick: MP max → TP inflexion; AP = MP → AP max; MP = 0 → TP max.

Concept: Long-run equilibrium of a perfectly competitive firm: P = AR = MR = LMC = minimum LAC.

1. MR = MC gives profit maximisation (true in short run too).
2. Free entry/exit wipes out super-normal profit, so P = AC (normal profit only).
3. Since P = MR under perfect competition, all five are equal, at the minimum point of LAC.

Short trick: Long run perfect competition: 'everything equal' – P = AR = MR = MC = AC (min).

Concept: Keynes's General Theory deals with involuntary unemployment in developed capitalist economies caused by deficient effective demand.

1. Keynes explicitly discussed voluntary and frictional unemployment (the classical categories) and involuntary unemployment.
2. Disguised unemployment (zero marginal productivity labour in agriculture of underdeveloped countries) was outside his framework – it was analysed later by Nurkse, Lewis, Rosenstein-Rodan.
3. So Keynesian theory is said to be inapplicable to underdeveloped economies where disguised unemployment dominates.

Short trick: Keynes = rich-country involuntary unemployment; disguised = poor-country farm labour (Nurkse/Lewis).

Concept: Y = C + I, with C = a + bY where a > 0 is autonomous consumption.

1. If I = 0, equilibrium Y = a/(1 − b) > 0.
2. People must consume even at zero income (by dissaving), so consumption keeps income above zero.
3. Multiplier needs some autonomous spending to act on; liquidity trap and interest rate do not keep Y positive.

Short trick: C-curve starts above the origin (a > 0) – so income never hits zero.

Concept: APC = C/Y. With C = a + bY and a > 0, consumption is always positive.

1. At low incomes C > Y (dissaving) → APC > 1; at high incomes APC < 1.
2. Since C > 0 and Y > 0, APC is always positive.
3. APC = 0 would need zero consumption, which is impossible (a minimum consumption is necessary for survival).

Short trick: APC can exceed 1 (dissaving), unlike MPC – but it can never be zero.

Concept: The LM curve is the locus of combinations of income (Y) and interest rate (r) at which the money market is in equilibrium (L = M).

1. Higher Y raises transactions demand for money; with fixed M, r must rise to cut speculative demand.
2. So LM slopes upward in the Y–r plane.
3. The IS curve is also a Y–r relation, but for goods-market equilibrium.

Short trick: IS and LM both plot Y against r: IS = goods market, LM = money market.

Concept: A. W. Phillips (1958), using UK data 1861–1957, found an inverse relation between the unemployment rate and the rate of change of money (nominal) wages.

1. Low unemployment → money wages rise fast; high unemployment → slow wage growth.
2. Samuelson and Solow later restated it as unemployment vs. inflation rate.
3. It is about money wages, not real wages, and about the rate of change, not the wage level.

Short trick: Original Phillips = U vs %Δmoney wage; modified = U vs inflation.

Concept: A monopolist faces a downward-sloping market demand curve, so it can fix either the price or the quantity, but not both.

1. If it fixes the price, buyers decide how much to purchase (quantity read off the demand curve).
2. If it fixes the output, the demand curve decides the price it can charge.
3. It cannot set both independently because it cannot control consumers' demand.

Short trick: Monopolist is a price-maker but still bound by demand: price OR output, never both.

Concept: Keynes explained the trade cycle mainly by fluctuations in the rate of investment, caused by changes in the marginal efficiency of capital (MEC).

1. Optimism raises MEC → investment rises → income rises by the multiplier (boom).
2. Collapse of MEC → investment falls → income and employment fall (depression).
3. Warranted rate of growth belongs to Harrod; autonomous investment is the Hicks/Samuelson multiplier–accelerator emphasis.

Short trick: Keynes cycle = MEC → rate of investment → multiplier.

Concept: Ragnar Nurkse (Problems of Capital Formation in Underdeveloped Countries, 1953) called disguised unemployment a 'concealed saving potential'.

1. Surplus farm workers have zero marginal product; withdrawing them leaves farm output unchanged.
2. They can be employed on capital projects (roads, irrigation) while the food they ate is still produced – the 'virtual saving' finances capital formation.
3. Fei–Ranis developed Lewis's labour-surplus model; Higgins wrote on technological dualism.

Short trick: Nurkse: surplus labour = hidden saving → capital formation.

Concept: The Multidimensional Poverty Index (UNDP–OPHI, 2010) has three equally weighted dimensions: health, education and standard of living.

1. Health: nutrition, child mortality.
2. Education: years of schooling, school attendance.
3. Standard of living: cooking fuel, sanitation, drinking water, electricity, housing, assets (India's NITI Aayog MPI adds maternal health and bank account).

Short trick: MPI = HDI's three dimensions measured as deprivations: Health, Education, Living standard.

Concept: Structural unemployment results from a mismatch between workers' skills and the jobs available, caused by changes in technology and the structure of the economy.

1. New technology/automation makes some skills obsolete (often called technological unemployment, a form of structural).
2. Seasonal – due to seasons (agriculture); cyclical – due to recession/deficient demand.
3. Disguised – more workers than needed, MP = 0.

Short trick: Technology changes the structure of jobs → structural unemployment.

Concept: In The Theory of Economic Development (1911), Schumpeter makes innovation by the entrepreneur the prime mover of development.

1. Innovation = new product, new method, new market, new source of supply, new organisation of industry.
2. Bank credit finances the innovator; imitators follow, creating cycles ('creative destruction').
3. Balanced growth is Nurkse/Rosenstein-Rodan; capital formation is emphasised by Nurkse, Harrod-Domar.

Short trick: Schumpeter = Entrepreneur + Innovation + Credit + Creative destruction.

Concept: Ragnar Nurkse: 'A country is poor because it is poor' – the vicious circle of poverty.

1. Supply side: low income → low saving → low investment → low productivity → low income.
2. Demand side: low income → small market → low inducement to invest → low productivity → low income.
3. Myrdal is linked with 'circular and cumulative causation' (backwash effects) – a related but different idea.

Short trick: Nurkse: 'Poor because poor'; Myrdal: cumulative causation.

Concept: For Keynes, unemployment is due to deficient effective demand; the cure is to raise aggregate demand, chiefly through increased government (public) spending.

1. In depression, monetary policy is weak (liquidity trap, pessimistic MEC), so lowering interest rates may not raise investment.
2. Public works / deficit-financed government expenditure raises income by the multiplier.
3. (A) and (D) would deepen unemployment.

Short trick: Keynes: 'Spend your way out of depression' – raise G (public works).