Public Economics — DU B.A. (Hons.) Economics Previous Year Question Papers

1. (a) What are developmental models of public sector growth? In this context, explain Baumol's Law. (b) State Arrow's impossibility theorem. Is majority decision rule an 'ideal' mechanism in this context? 2. (a) Consider a two-good economy with a single consumer and a single firm. Using suitable diagrams, determine the optimal commodity tax for this economy. Will a tax on labour change the outcome? Discuss. (b) What is Hawthorne effect? (15+3) 3. Write short notes on any three: (a) Fallacies of optimal taxation (b) Ratchet effect (c) Revenue deficit, fiscal deficit, and primary deficit (d) Imperfect information as a reason for excessive government (6+6+6) 4. (a) Analyse the reasons behind the low revenue productivity of India's tax system despite several reform efforts. (b) "The more elastic the demand curve and the less elastic the supply curve, lower is the economic incidence on consumers.' Do you agree? Justify using appropriate diagrams. (8+10) 5. (a) Using suitable diagrams, contrast the effects of a proportional and progressive tax that have the same impact on utility of an individual. Which is superior and why? (b) What are the principal costs and risks associated with India's high debt? Examine the measures implemented to alleviate this issue. (9+9) 6. (a) Suppose the government imposes a specific tax of 2 per unit on a good with linear demand Qd = 100 - 2P; and supply Qs = 20 + 3P. (i) Find the equilibrium price and quantity before and after the tax. (ii) Calculate the tax incidence on consumers and producers. (iii) Compute the deadweight loss. (b) Evaluate the impact of an interest income tax on savings. Substantiate using appropriate diagrams. (4+4+3+7) 7. (a) Discuss the impact of GST on cost saving, revenue generation, and productivity gains. (b) Critically examine the problem of under-reporting of income by wealthy Indians. Suggest possible remedial measures. (10+8) (A bility Theorem)