BSEB Matric Economics cheat sheet

Economics studies how scarce resources with alternative uses are allocated to satisfy unlimited wants; scarcity and choice are its twin foundations.

Microeconomics studies individual units (household, firm, price of one good); macroeconomics studies aggregates (national income, general price level, employment).

Positive economics is fact-based and testable ('what is'); normative economics involves value judgements ('what ought to be').

Central problems of every economy: what to produce, how to produce, and for whom to produce; plus the problem of full utilisation of resources.

Opportunity cost = value of the next best alternative forgone; it underlies all choice and is the basis of cost-benefit reasoning.

Production possibility frontier shows maximum combinations of two goods; points on the curve are efficient, inside are underutilisation, outside are unattainable with given resources.

Law of demand: other things equal, quantity demanded falls as price rises (inverse relation); movement along the curve = price change, shift = change in other factors.

Elasticity of demand = percentage change in quantity demanded / percentage change in price; elastic if >1, inelastic if <1, unitary if =1.

Factors of production: land (rent), labour (wages), capital (interest), entrepreneurship (profit); each earns a factor reward.

Colonial economy: India was a supplier of raw materials and a market for British manufactures; deindustrialisation hit handicrafts and handloom weavers.

Zamindari, Ryotwari and Mahalwari were the three main land revenue systems introduced under British rule.

Commercialisation of agriculture pushed cash crops (indigo, cotton, jute) and worsened peasant indebtedness and famines.

At independence (1947), agriculture employed about 70-75% of the workforce and contributed roughly half of national income; industrial base was narrow.

Partition divided markets and raw-material sources: jute-growing areas went to East Pakistan while jute mills stayed in West Bengal.

Post-independence goals: growth with equity, self-reliance, land reform, and removal of poverty; the Planning Commission was set up in 1950.

Green Revolution (from mid-1960s) used HYV seeds, irrigation and fertilisers, raising wheat output mainly in Punjab, Haryana and western UP.

1991 economic reforms (LPG: liberalisation, privatisation, globalisation) followed a balance-of-payments crisis; licensing was largely dismantled.

Planning Commission set up in 1950 (chairperson: the Prime Minister); NITI Aayog replaced it on 1 January 2015.

First Five-Year Plan (1951-56) focused on agriculture, irrigation and power; it was based on the Harrod-Domar model.

Second Plan (1956-61) adopted Mahalanobis model and stressed heavy and basic industries; it followed the socialist pattern of society (1956).

Plans are of two types: imperative (socialist, state-directed) and indicative (capitalist, market-guided); India used a mixed approach.

Five-Year Plans ran from 1951-52 to 2017, the Twelfth Plan (2012-17) being the last; NITI Aayog now issues strategy and action agendas instead.

Objectives of Indian planning: growth, employment, poverty reduction, self-reliance, modernisation, and balanced regional development.

Decentralised planning: 73rd and 74th Constitutional Amendments (1992) gave constitutional status to Panchayati Raj and urban local bodies.

Primary sector: extraction from nature (agriculture, mining, fishing, forestry); secondary: manufacturing and construction; tertiary: services (trade, transport, banking, education).

GDP = value of all final goods and services produced within domestic territory in a year; GNP = GDP + net factor income from abroad.

Structural change: the share of agriculture in GDP has fallen to roughly 15-18% while services contribute over half, yet agriculture still employs a large share of workers.

Disguised unemployment: more people work on a farm or job than are needed, so marginal product of extra workers is near zero.

Organised sector covers enterprises registered and regulated by law (factories, banks); unorganised sector is largely outside such regulation and lacks social security.

Public sector provides public goods and welfare services; private sector produces for profit; India follows a mixed economy.

Contribution to employment matters as much as contribution to output: underemployment is common where low-productivity work is widespread.

Bihar agriculture is dominated by foodgrains: rice, wheat and maize; the state is a leading producer of litchi, makhana and vegetables.

Bihar's small and fragmented holdings (average operational holding under one hectare) limit mechanisation and economies of scale.

Flood-prone north Bihar and drought-prone south Bihar make irrigation and flood control central to the state's farm policy.

Green Revolution benefits were uneven; eastern India, including Bihar, saw limited gains until later seed and irrigation programmes.

Farm credit sources: cooperative banks, regional rural banks, commercial banks, NABARD refinance and self-help groups/microfinance.

Minimum Support Price is announced by the government on the recommendation of the Commission for Agricultural Costs and Prices (CACP).

Rural non-farm employment (dairy, handicrafts, rural micro-enterprises) supplements seasonal farm income; migration for work is significant in Bihar.

Land reform measures: abolition of intermediaries, tenancy regulation, ceilings on holdings and consolidation of fragmented plots.

Industrial policy resolutions (1948, 1956, 1991) mark the shift from a state-led, licensed regime to liberalisation and de-licensing.

Small-scale and cottage industries are labour-intensive, need low capital, and generate employment; khadi and village industries are promoted through boards.

Infrastructure = economic infrastructure (power, transport, communication, irrigation) plus social infrastructure (education, health, housing).

Service sector is the largest contributor to India's GDP, led by trade, transport, real estate, finance, IT and business services.

Industrial location depends on raw material, power, transport, labour, market and government policy; Bihar's industrial base is thin and being promoted through industrial policy incentives.

Public-Private Partnership (PPP) shares risk between government and private firms in building infrastructure such as roads and power plants.

Make in India, Start-up India and the Bihar Industrial Investment Promotion Policy are current instruments of industrial promotion.

Functions of money: medium of exchange, measure of value, store of value, standard of deferred payment.

Money supply measures: M1 = currency with public + demand deposits + other deposits with RBI; M3 = M1 + time deposits with banks (broad money).

RBI (founded 1935, nationalised 1949) is the central bank: issues currency, acts as banker to government and banks, and controls credit.

Credit control tools: repo rate, reverse repo, cash reserve ratio (CRR), statutory liquidity ratio (SLR), open market operations and bank rate.

Repo rate is the rate at which RBI lends to commercial banks against securities; a rise in repo generally makes credit costlier.

Commercial banks accept deposits and lend; cooperative banks and regional rural banks serve agriculture and small borrowers, with NABARD as apex for rural credit.

Credit creation by banks: total deposits = initial deposit x 1/reserve ratio; the multiplier grows as the reserve ratio falls.

Financial inclusion schemes: Jan Dhan Yojana accounts, Mudra loans for micro-enterprises, and direct benefit transfer through bank accounts.

Poverty line is a consumption expenditure benchmark; the Tendulkar and Rangarajan committees estimated poverty using calorie and non-food norms.

Absolute poverty compares income with a fixed minimum; relative poverty compares a household with others in the same society.

Types of unemployment: open, disguised, seasonal, structural, cyclical and frictional; disguised and seasonal dominate rural India.

Human Development Index (HDI) combines life expectancy (health), mean and expected years of schooling (education) and per capita income (standard of living).

Human capital formation means investment in education, health and training that raises worker productivity and future income.

Poverty alleviation programmes have included MGNREGA (rural wage employment guarantee), PMAY housing, and food security through the Public Distribution System.

Bihar faces high population density and out-migration; remittances and rural public works are important income supports.

Unemployment rate = (number unemployed / labour force) x 100; labour force participation matters for interpreting the rate.

Budget is the annual statement of estimated government receipts and expenditure; it has revenue and capital accounts.

Revenue receipts do not create liabilities (taxes, fees, grants); capital receipts create liabilities or reduce assets (borrowing, disinvestment).

Revenue expenditure does not create assets (salaries, subsidies); capital expenditure creates assets (roads, dams).

Fiscal deficit = total expenditure - total receipts excluding borrowings; it measures the government's borrowing requirement.

Revenue deficit = revenue expenditure - revenue receipts; primary deficit = fiscal deficit - interest payments.

Direct taxes are paid directly by the taxpayer (income tax, corporate tax); indirect taxes are levied on goods and services and shift to the consumer (GST, customs).

GST (from 1 July 2017) is a destination-based value-added tax on supply of goods and services, with CGST, SGST and IGST components.

Government roles: providing public goods, correcting externalities, redistribution through taxes and transfers, and stabilising the economy through fiscal policy.

Public debt is the accumulation of past deficits; interest payments are a non-developmental committed expenditure.

Globalisation = integration of national economies through trade, capital flows, technology, migration and information.

Liberalisation (removing controls), privatisation (transfer to private ownership) and globalisation together form the LPG reforms of 1991.

Balance of trade = exports of goods - imports of goods; balance of payments records all external transactions including invisibles and capital flows.

India's major exports include petroleum products, gems and jewellery, engineering goods, textiles and pharmaceuticals; major imports include crude oil, gold and electronics.

WTO (1995, successor to GATT) administers trade rules, settles disputes and seeks tariff reduction; India is a founding member.

IMF promotes monetary cooperation and short-term balance-of-payments support; World Bank (IBRD) funds long-term development projects.

Multinational corporations bring capital and technology but may crowd out domestic firms and repatriate profits.

Arguments for globalisation: efficiency, technology transfer, consumer choice; against: job loss in unorganised sectors, import dependence and inequality.

Consumer Protection Act, 1986 established three-tier redressal: District Commission, State Commission and National Commission; the 2019 Act updated the framework.

Consumer rights: safety, information, choice, being heard, redressal, and consumer education.

Consumer responsibilities: check quality and expiry, demand a bill, read labels, and avoid fake or spurious products.

Standardisation marks: ISI (BIS) for industrial goods, AGMARK for agricultural produce, FSSAI for food, Hallmark for gold jewellery.

A consumer can file a complaint for defective goods, deficient services, unfair trade practices or misleading advertisements.

Right to information means the consumer can obtain details about ingredients, price, quantity and manufacturing date before buying.

The consumer movement in India grew through consumer organisations, awareness campaigns and legal remedies; 24 December is observed as National Consumer Day.

Product liability and e-commerce rules extend consumer protection to online purchases and misleading advertising.