CHSE Odisha Elective Economics key terms

The value of the next best alternative given up when a choice is made. It arises because resources are scarce and can be put to only one use at a time.

The condition in which available resources are limited relative to the unlimited wants of people. It forces every economy to choose what, how and for whom to produce.

A curve showing the maximum combinations of two goods an economy can produce with full and efficient use of given resources and technology. Points inside it indicate unemployment or inefficiency.

The addition to total satisfaction from consuming one more unit of a good in a given period. It generally falls as consumption increases, which underlies the law of demand.

As a consumer takes more units of a good in a given time, the extra satisfaction from each additional unit becomes smaller. This explains why demand curves slope downward.

A curve joining all combinations of two goods that give a consumer the same level of satisfaction. The consumer is indifferent among points on the same curve.

The number of units of one good a consumer is willing to give up to obtain one more unit of another good while staying on the same indifference curve. It diminishes along a convex curve.

A line showing all combinations of two goods a consumer can buy by spending a given income fully at given prices. Its slope equals the ratio of the two prices.

The situation in which a consumer maximises satisfaction subject to income and prices. Under the indifference-curve approach it occurs where the budget line is tangent to an indifference curve.

The degree of responsiveness of quantity demanded to a change in the good's own price, measured as percentage change in quantity divided by percentage change in price. Demand may be elastic, inelastic or unitary.

Other things remaining constant, quantity demanded of a good rises when its price falls and falls when its price rises. This inverse relationship gives the demand curve its downward slope.

The responsiveness of quantity demanded to a change in consumer income, measured as percentage change in quantity divided by percentage change in income. It is negative for inferior goods.

In the short run, as more units of a variable input are added to fixed inputs, marginal product first rises, then falls, and eventually becomes negative. It describes short-run production with one fixed factor.

The addition to total output from employing one more unit of a variable input, holding other inputs fixed. It equals the change in total product divided by the change in input.

Total output divided by the number of units of a variable input employed. It rises while marginal product exceeds it and falls when marginal product is below it.

The behaviour of output when all inputs are increased in the same proportion in the long run. Output may rise more than proportionately (increasing), equally (constant) or less than proportionately (decreasing).

Other things remaining constant, quantity supplied of a good rises with its price and falls when price falls. The direct relationship gives the supply curve its upward slope.

The responsiveness of quantity supplied to a change in price, measured as percentage change in quantity supplied divided by percentage change in price. Supply is more elastic in the long run.

Cost that does not change with the level of output in the short run, such as rent on a factory. It must be paid even when output is zero.

Cost that varies directly with the quantity produced, such as spending on raw materials and casual labour. It is zero when output is zero.

The addition to total cost from producing one more unit of output. It equals the change in total cost divided by the change in quantity produced.

The price and quantity at which quantity demanded equals quantity supplied, so there is neither excess demand nor excess supply. The market clears at this point.

A market structure with many buyers and sellers, a homogeneous product, free entry and exit, and perfect information. Each firm is a price taker facing a horizontal demand curve.

A market with a single seller of a product having no close substitutes and strong barriers to entry. The firm is a price maker and can earn abnormal profit in the long run.

A market with many sellers of differentiated products, free entry and exit, and some price-setting power through brand and product differences. Firms compete through selling costs as well as price.

The market value of all final goods and services produced within a country's domestic territory during a year. It counts only final output to avoid double counting.

The sum of factor incomes earned by normal residents of a country in an accounting year, that is, compensation of employees, rent, interest and profit. It equals net national product at factor cost.

Gross domestic product minus depreciation of fixed capital. It measures the value of output after allowing for the capital used up during production.

The total stock of money held by the public at a point of time. In India, M1 includes currency with the public plus demand deposits with banks.

The process by which commercial banks expand deposits, and hence money supply, from a given amount of primary deposits. The total expansion depends on the cash reserve ratio.

The proportion of a bank's net demand and time liabilities that must be kept as cash balances with the central bank. A higher ratio reduces a bank's capacity to create credit.

The rate at which the central bank lends short-term funds to commercial banks against approved securities. Raising it makes credit costlier and is a contractionary policy tool.

The ratio of a change in national income to the initial change in investment that caused it. It equals one divided by one minus the marginal propensity to consume.

The fraction of an additional unit of income that households spend on consumption. It lies between zero and one and determines the size of the multiplier.

The excess of total government expenditure over total receipts excluding borrowings in a year. It measures how much the government must borrow to meet its spending.

The excess of revenue expenditure over revenue receipts of the government in a year. It shows the shortfall in meeting day-to-day spending from routine income.

Fiscal deficit minus interest payments on past debt. It indicates the current year's borrowing need excluding the burden of interest on earlier loans.

A systematic record of all economic transactions between residents of a country and the rest of the world in a year. It has a current account and a capital account.

The part of the balance of payments recording trade in goods and services, income flows and unilateral transfers. A deficit means the country spends more abroad than it earns.

The price of one country's currency expressed in units of another country's currency. It may be fixed by the central bank or determined by market demand and supply.

A fall in the market value of a currency in terms of foreign currencies under a flexible exchange rate system. It makes exports cheaper and imports costlier.

The strategy of raising foodgrain output in India from the late 1960s through high-yielding seed varieties, irrigation, fertilisers and credit. It was concentrated in wheat-growing regions such as Punjab and Haryana.

Measures adopted in India after independence to change ownership and use of agricultural land, including abolition of intermediaries, tenancy reform and ceilings on holdings. Their implementation varied across states.