NTA UGC NET/JRF Exam, June 2019 Economics (Shift-II)

Headcount ratio
The headcount ratio (HCR) is the proportion of the population that exists, or lives, below the poverty line or poverty threshold.
i.e ⇒ 3/8 = 0.375
Thus, the headcount ratio in state A and state B is 0.375 respectively.

(1) The Poverty gap is a measure of the extent to which country's poor fall below the poverty line: The poverty gap is the percentage by which the average [income of the poor falls below the poverty line.

(2) Formula to calculate poverty gap ratio Poverty Gap Ratio (PGR)
Z is the poverty line MPCE cut-off t is the monthly per capita consumption expenditure (MPCE) of belowpoverty households

Using the formula for PGR, the Poverty Gap Ratio for state A (having the poverty line) will be calculated:
Thus, the Poverty Gap Ratio for state B is 0.119.

Square poverty gap ratio (SDGR) for state
A = (PGR for state A)²
SPGR for state A = (0.0133)²
= 0.000176.
SPGR for state B = (PGR of state B)²
= (0.119)² = 0.01416
Hence, SPGR in state A is lower than the state B.

Market failure can occur in the case of most environmental goods because they are often public goods.

Public goods→ These are non-rival and non-excludable, meaning that people can enjoy them without paying for them. For eg. clean air and national defense are public goods.

IRR is a discount rate that makes the Net Present Value (NPV) of all cash flows equal to zero in a discounted cash flow analysis. IRR calculations rely on the same formula as NPV does.

Keep in mind that IRR is not the actual dollar value of the project. It is the annual return that makes the NPV equal to zero and benefit cost ratio of 1.

The hedonic price method is a statistical analysis method that estimates the economic value of non-market effects by observing how people behave in property markets. Its also known as the hedonic regression method. The method works by:

Decomposing the price: Breaking down the price of a market good into its individual characteristics

Identifying the value of a non-market amenity: Isolating the effect of a non-market features on the price of a market good.

The hedonic price method is often used to estimate the economic value of environmental serives or amenities, such as: air pollution, water pollution. noise, aesthetic views and proximity to recreational sites.

Some advantages of the hedonic price method include: Flexibility, adaptability and reasonable prices.

"Hedonic price" method measures the value of environmental assets through using the linkages between variation of inhouse prices.

The statement "Under so me conditions it makes no difference to efficiency whether the polluter has a right to pollute or the victim has a right to clean air" is related to the work of R. Coase. Note:

The Coase Theorem is a legal and economic theory developed by economists Ronald Coase regarding property rights, which states that where there are complete competitive markets with no transaction costs and an efficient set of inputs and outputs, an optimal decision will be selected.

Life table is a mathematical model that portrays the mortality condition at a particular time in a population and provides a basis for measuring longevity.