The Arthashastri

  The ‘Dharma Sankat’ of Petrol Prices Co-authored by: Gautam Sodani & Varish Seth Credit: OfferGrid (Pinterest) Prime Minister Narendra Modi, on 17th February 2021, said, “India imports more than 85% of its oil requirements and the recent price hike is due to the negligence of previous governments towards reducing India’s import dependence in the energy sector.” He obliquely pointed that this price hike is to curb the domestic demand of petrol and diesel (law of demand), which in turn will reduce our dependence on imports, and as a result we will look at domestic production of alternative sources of energy.  It is a fascinating ‘economic argument’ and a ‘vital step’ to make India Atmanirbhar in the energy sector, isn’t it? However, the Prime Minister seems to be totally ignorant of another basic economic concept called the ‘price elasticity of demand’ – which essentially renders his entire argument to be inherently flawed. Petrol and diesel are primary inputs for essentia...

  Rationality of an Irrational Consumer With rapid globalization and technological advancement in recent years, consumers have become lazy and more occupied.   Does this affect consumer rationality? The mainstream field of economics emanated and evolved rapidly when man realized there is scarcity of resources. And that’s why the archetypal economic theory of consumer says that ‘people should relish choices and make a rational decision out of their constrained budget and preferences they hold’. But sometimes making a rational choice could be exhausting such that anyone forced to make a number of decisions in a row is likely to appear as lazy and having too many choices can leave a consumer ending without a rational conclusion. That’s why ‘rationality’ of a consumer is often questioned in contemporary economics. Having choices or alternatives is good. It makes the market more competitive and paves the way for gains from trade. That's the view of neoclassical consumer th...