Assam ASSEB HS Class 11-12 Economics flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Opportunity cost

The value of the next best alternative forgone when a choice is made. It includes explicit and implicit costs but excludes sunk costs already incurred.

Production possibility frontier

A curve showing maximum combinations of two goods an economy can produce with given resources and technology. Points on it are efficient; points inside are inefficient.

Microeconomics vs macroeconomics

Microeconomics studies individual units like a consumer, firm, or single market. Macroeconomics studies economy-wide aggregates such as national income, general price level, and employment.

Law of diminishing marginal utility

As a consumer takes more units of a good, utility from each extra unit falls. Total utility rises while marginal utility is positive and peaks when it is zero.

Marginal rate of substitution

The rate at which a consumer gives up one good to obtain one more unit of another while staying on the same indifference curve. It diminishes along a convex curve.

Price elasticity of demand

Percentage change in quantity demanded divided by percentage change in price. Demand is elastic when the value exceeds one and inelastic when it is below one.

Movement along demand curve

A change in quantity demanded caused only by a change in the good's own price. Any other determinant shifts the entire demand curve instead.

Law of variable proportions

With one variable input, marginal product first rises, then falls, and may turn negative. A rational producer stays in the stage of positive but falling marginal product.

Relation between MC and AC

Marginal cost cuts average cost at its minimum point. When marginal cost is below average cost, average cost falls; when above, average cost rises.

Price elasticity of supply

Percentage change in quantity supplied divided by percentage change in price. Supply through the origin has unitary elasticity; a vertical supply curve is perfectly inelastic.

Shut-down point

The output level where price equals minimum average variable cost. Below this price a competitive firm loses less by stopping production than by continuing.

Perfect competition features

Many buyers and sellers, homogeneous product, free entry and exit, perfect information, and no transport cost. Each firm is a price taker facing a horizontal demand curve.

Monopolistic competition

A market with many firms selling differentiated products and free entry and exit. Each firm faces a downward-sloping but fairly elastic demand curve.

Price ceiling

A maximum price fixed below the equilibrium price. It creates excess demand, shortage, and often black marketing or rationing.

Gross domestic product

Market value of all final goods and services produced within a country's domestic territory during a year. Intermediate goods and transfer payments are excluded.

Net factor income from abroad

Income earned by residents from abroad minus income earned by non-residents within the country. Adding it to GDP gives gross national product.

GDP deflator

Nominal GDP divided by real GDP, multiplied by one hundred. It measures the change in price level for all goods included in GDP.

Money multiplier

The ratio of total money supply to high-powered money, equal to one divided by the reserve ratio. It shows how deposits expand credit.

Repo rate

The rate at which the central bank lends short-term funds to commercial banks against securities. Raising it reduces liquidity and is contractionary.

Cash reserve ratio

The share of net demand and time liabilities that banks must hold as cash reserves with the central bank. It earns no interest for banks.

Investment multiplier

The ratio of change in national income to change in investment, equal to one divided by one minus marginal propensity to consume.

Fiscal deficit

Total expenditure minus total receipts excluding borrowings. It shows how much the government must borrow to meet its spending.

Deflationary gap

The shortfall of aggregate demand below the level needed for full employment. It causes unemployment and calls for expansionary fiscal or monetary policy.

Balance of trade

Exports of goods minus imports of goods. It is only part of the current account, which also includes services, income, and transfers.

Currency depreciation

A fall in a currency's value under a flexible exchange rate. It makes exports cheaper and imports costlier, tending to improve the trade balance over time.

Current account deficit

When receipts from goods, services, income, and transfers fall short of payments on them. It is financed by capital inflows or by drawing down reserves.

Disinvestment

Sale by the government of part of its equity in public sector undertakings. It is a capital receipt and does not add to revenue receipts.

Human Development Index

A composite measure combining life expectancy, education measured by schooling years, and per capita gross national income, used to rank development levels.

Primary and secondary data

Primary data are collected first-hand by the investigator for the study. Secondary data were collected earlier by someone else and are reused.

Exclusive vs inclusive series

In an exclusive series the upper limit of a class equals the lower limit of the next. In an inclusive series there is a gap, which must be adjusted before analysis.

Median for grouped data

L plus the product of class width and the ratio of half the total frequency minus cumulative frequency to the class frequency.

Coefficient of variation

Standard deviation divided by mean, multiplied by one hundred. It compares variability of distributions measured in different units.