Karnataka II PUC Economics (KSEAB) cheat sheet

Microeconomics studies individual units - a consumer, a firm, a single market; macroeconomics studies aggregates such as national income and general price level.

Scarcity and choice are the core of the subject: wants are unlimited, resources are limited and have alternative uses, so every choice carries an opportunity cost.

Opportunity cost of a good is the value of the next best alternative forgone; it is measured in real terms, not money alone.

Production possibility frontier is concave to the origin because marginal opportunity cost rises (increasing MOC); points inside are inefficient, points on the curve are full-efficiency combinations, points beyond are unattainable with given resources.

PPF shifts right when resources or technology improve; it shifts outward asymmetrically if only one good's production capacity grows.

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

Market economy solves allocation through the price mechanism; a centrally planned economy uses state directives; a mixed economy combines both.

Positive economics deals with 'what is' and is testable; normative economics deals with 'what ought to be' and involves value judgements.

Micro and macro are complementary, not contradictory: the price of a single commodity is a micro question, the price level of all commodities is a macro question.

Law of diminishing marginal utility: as consumption of a good increases continuously, the utility from each additional unit falls; TU rises while MU is positive, TU is maximum when MU = 0, TU falls when MU is negative.

Total utility is the sum of marginal utilities; MU of the nth unit = TU(n) − TU(n−1).

Consumer's equilibrium in single-commodity case: MU in money terms = price (MUx/Px = MUm); in two-commodity case: MUx/Px = MUy/Py.

Law of equi-marginal utility: a consumer maximises satisfaction by allocating income so that the marginal utility per rupee is equal across all goods.

Indifference curve properties: downward sloping, convex to the origin (diminishing marginal rate of substitution), and higher curves represent higher satisfaction; ICs never intersect.

Budget line equation: Px·X + Py·Y = M; slope = −Px/Py. A change in income shifts the budget line parallel; a change in one price rotates it.

Consumer's equilibrium with indifference curves: the IC is tangent to the budget line, so MRSxy = Px/Py at the point of tangency.

Law of demand: other things equal, quantity demanded rises when price falls and falls when price rises - inverse price–quantity relation, giving a downward-sloping demand curve.

Movement along the demand curve is caused by own price change (change in quantity demanded); a shift of the curve is caused by income, tastes, prices of related goods or population (change in demand).

Production function relates physical inputs to maximum output: Q = f(L, K); short run has at least one fixed factor, long run has all factors variable.

Law of variable proportions: with one factor variable, MP first rises, then falls, then becomes negative; TP rises at an increasing rate, then at a decreasing rate, then falls.

Relationship: AP is rising when MP > AP, falling when MP < AP, and AP is maximum where MP = AP; TP is maximum where MP = 0.

Returns to scale are a long-run concept: increasing, constant and decreasing returns to scale when all inputs are changed in the same proportion.

Cost curves: TC = TFC + TVC; AFC = TFC/Q always falls; AVC and AC are U-shaped; MC cuts AC and AVC at their minimum points.

In the short run AC falls when MC < AC and rises when MC > AC; the vertical gap between AC and AVC equals AFC and shrinks as output rises.

Law of supply: other things equal, quantity supplied rises with price; the supply curve slopes upward. Movement along the curve follows own price; shifts follow input prices, technology, taxes/subsidies or number of firms.

Elasticity of supply Es = (percentage change in quantity supplied) ÷ (percentage change in price); Es > 1 elastic, Es < 1 inelastic, Es = 1 unitary, Es = 0 perfectly inelastic.

Revenue relations: TR = P × Q; MR = ΔTR/ΔQ; under perfect competition P = AR = MR, while under monopoly MR < AR and MR can be negative.

Perfect competition features: very large number of buyers and sellers, homogeneous product, free entry and exit, perfect knowledge, no transport cost - the firm is a price taker and faces a horizontal demand curve.

Monopoly: single seller, no close substitutes, strong barriers to entry, price maker; the demand curve slopes downward and MR < AR.

Monopolistic competition: many sellers, differentiated products, free entry and exit, selling costs and advertising; the firm has some price-setting power.

Oligopoly: few large firms, interdependence in decision-making, kinked demand curve explains price rigidity; entry is difficult.

Profit-maximising condition for all market forms: MR = MC and MC must be rising at the point of intersection (second-order condition).

In the short run a competitive firm may earn supernormal profit (P > AC), normal profit (P = AC) or incur loss (P < AC), but shuts down if P < minimum AVC.

In the long run, free entry and exit under perfect competition drive price to minimum AC, so firms earn only normal profit and P = AR = MR = MC = minimum AC.

Market equilibrium occurs where market demand equals market supply; an excess demand (price below equilibrium) pushes price up, excess supply pushes it down.

Effects of a price ceiling set below equilibrium: shortage, rationing and black marketing; a price floor set above equilibrium: surplus, often requiring government purchase support.

Microeconomics studies individual units - a consumer, a firm, a single market; macroeconomics studies aggregates such as national income and general price level.

Scarcity and choice are the core of the subject: wants are unlimited, resources are limited and have alternative uses, so every choice carries an opportunity cost.

Opportunity cost of a good is the value of the next best alternative forgone; it is measured in real terms, not money alone.

Production possibility frontier is concave to the origin because marginal opportunity cost rises (increasing MOC); points inside are inefficient, points on the curve are full-efficiency combinations, points beyond are unattainable with given resources.

PPF shifts right when resources or technology improve; it shifts outward asymmetrically if only one good's production capacity grows.

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

Market economy solves allocation through the price mechanism; a centrally planned economy uses state directives; a mixed economy combines both.

Positive economics deals with 'what is' and is testable; normative economics deals with 'what ought to be' and involves value judgements.

Micro and macro are complementary, not contradictory: the price of a single commodity is a micro question, the price level of all commodities is a macro question.

Law of diminishing marginal utility: as consumption of a good increases continuously, the utility from each additional unit falls; TU rises while MU is positive, TU is maximum when MU = 0, TU falls when MU is negative.

Total utility is the sum of marginal utilities; MU of the nth unit = TU(n) − TU(n−1).

Consumer's equilibrium in single-commodity case: MU in money terms = price (MUx/Px = MUm); in two-commodity case: MUx/Px = MUy/Py.

Law of equi-marginal utility: a consumer maximises satisfaction by allocating income so that the marginal utility per rupee is equal across all goods.

Indifference curve properties: downward sloping, convex to the origin (diminishing marginal rate of substitution), and higher curves represent higher satisfaction; ICs never intersect.

Budget line equation: Px·X + Py·Y = M; slope = −Px/Py. A change in income shifts the budget line parallel; a change in one price rotates it.

Consumer's equilibrium with indifference curves: the IC is tangent to the budget line, so MRSxy = Px/Py at the point of tangency.

Law of demand: other things equal, quantity demanded rises when price falls and falls when price rises - inverse price–quantity relation, giving a downward-sloping demand curve.

Movement along the demand curve is caused by own price change (change in quantity demanded); a shift of the curve is caused by income, tastes, prices of related goods or population (change in demand).

Production function relates physical inputs to maximum output: Q = f(L, K); short run has at least one fixed factor, long run has all factors variable.

Law of variable proportions: with one factor variable, MP first rises, then falls, then becomes negative; TP rises at an increasing rate, then at a decreasing rate, then falls.

Relationship: AP is rising when MP > AP, falling when MP < AP, and AP is maximum where MP = AP; TP is maximum where MP = 0.

Returns to scale are a long-run concept: increasing, constant and decreasing returns to scale when all inputs are changed in the same proportion.

Cost curves: TC = TFC + TVC; AFC = TFC/Q always falls; AVC and AC are U-shaped; MC cuts AC and AVC at their minimum points.

In the short run AC falls when MC < AC and rises when MC > AC; the vertical gap between AC and AVC equals AFC and shrinks as output rises.

Law of supply: other things equal, quantity supplied rises with price; the supply curve slopes upward. Movement along the curve follows own price; shifts follow input prices, technology, taxes/subsidies or number of firms.

Elasticity of supply Es = (percentage change in quantity supplied) ÷ (percentage change in price); Es > 1 elastic, Es < 1 inelastic, Es = 1 unitary, Es = 0 perfectly inelastic.

Revenue relations: TR = P × Q; MR = ΔTR/ΔQ; under perfect competition P = AR = MR, while under monopoly MR < AR and MR can be negative.

Perfect competition features: very large number of buyers and sellers, homogeneous product, free entry and exit, perfect knowledge, no transport cost - the firm is a price taker and faces a horizontal demand curve.

Monopoly: single seller, no close substitutes, strong barriers to entry, price maker; the demand curve slopes downward and MR < AR.

Monopolistic competition: many sellers, differentiated products, free entry and exit, selling costs and advertising; the firm has some price-setting power.

Oligopoly: few large firms, interdependence in decision-making, kinked demand curve explains price rigidity; entry is difficult.

Profit-maximising condition for all market forms: MR = MC and MC must be rising at the point of intersection (second-order condition).

In the short run a competitive firm may earn supernormal profit (P > AC), normal profit (P = AC) or incur loss (P < AC), but shuts down if P < minimum AVC.

In the long run, free entry and exit under perfect competition drive price to minimum AC, so firms earn only normal profit and P = AR = MR = MC = minimum AC.

Market equilibrium occurs where market demand equals market supply; an excess demand (price below equilibrium) pushes price up, excess supply pushes it down.

Effects of a price ceiling set below equilibrium: shortage, rationing and black marketing; a price floor set above equilibrium: surplus, often requiring government purchase support.

Microeconomics studies individual units - a consumer, a firm, a single market; macroeconomics studies aggregates such as national income and general price level.

Scarcity and choice are the core of the subject: wants are unlimited, resources are limited and have alternative uses, so every choice carries an opportunity cost.

Opportunity cost of a good is the value of the next best alternative forgone; it is measured in real terms, not money alone.

Production possibility frontier is concave to the origin because marginal opportunity cost rises (increasing MOC); points inside are inefficient, points on the curve are full-efficiency combinations, points beyond are unattainable with given resources.

PPF shifts right when resources or technology improve; it shifts outward asymmetrically if only one good's production capacity grows.

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

Market economy solves allocation through the price mechanism; a centrally planned economy uses state directives; a mixed economy combines both.

Positive economics deals with 'what is' and is testable; normative economics deals with 'what ought to be' and involves value judgements.

Micro and macro are complementary, not contradictory: the price of a single commodity is a micro question, the price level of all commodities is a macro question.

Law of diminishing marginal utility: as consumption of a good increases continuously, the utility from each additional unit falls; TU rises while MU is positive, TU is maximum when MU = 0, TU falls when MU is negative.

Total utility is the sum of marginal utilities; MU of the nth unit = TU(n) − TU(n−1).

Consumer's equilibrium in single-commodity case: MU in money terms = price (MUx/Px = MUm); in two-commodity case: MUx/Px = MUy/Py.

Law of equi-marginal utility: a consumer maximises satisfaction by allocating income so that the marginal utility per rupee is equal across all goods.

Indifference curve properties: downward sloping, convex to the origin (diminishing marginal rate of substitution), and higher curves represent higher satisfaction; ICs never intersect.

Budget line equation: Px·X + Py·Y = M; slope = −Px/Py. A change in income shifts the budget line parallel; a change in one price rotates it.

Consumer's equilibrium with indifference curves: the IC is tangent to the budget line, so MRSxy = Px/Py at the point of tangency.

Law of demand: other things equal, quantity demanded rises when price falls and falls when price rises - inverse price–quantity relation, giving a downward-sloping demand curve.

Movement along the demand curve is caused by own price change (change in quantity demanded); a shift of the curve is caused by income, tastes, prices of related goods or population (change in demand).

Production function relates physical inputs to maximum output: Q = f(L, K); short run has at least one fixed factor, long run has all factors variable.

Law of variable proportions: with one factor variable, MP first rises, then falls, then becomes negative; TP rises at an increasing rate, then at a decreasing rate, then falls.

Relationship: AP is rising when MP > AP, falling when MP < AP, and AP is maximum where MP = AP; TP is maximum where MP = 0.

Returns to scale are a long-run concept: increasing, constant and decreasing returns to scale when all inputs are changed in the same proportion.

Cost curves: TC = TFC + TVC; AFC = TFC/Q always falls; AVC and AC are U-shaped; MC cuts AC and AVC at their minimum points.

In the short run AC falls when MC < AC and rises when MC > AC; the vertical gap between AC and AVC equals AFC and shrinks as output rises.

Law of supply: other things equal, quantity supplied rises with price; the supply curve slopes upward. Movement along the curve follows own price; shifts follow input prices, technology, taxes/subsidies or number of firms.

Elasticity of supply Es = (percentage change in quantity supplied) ÷ (percentage change in price); Es > 1 elastic, Es < 1 inelastic, Es = 1 unitary, Es = 0 perfectly inelastic.

Revenue relations: TR = P × Q; MR = ΔTR/ΔQ; under perfect competition P = AR = MR, while under monopoly MR < AR and MR can be negative.

Perfect competition features: very large number of buyers and sellers, homogeneous product, free entry and exit, perfect knowledge, no transport cost - the firm is a price taker and faces a horizontal demand curve.

Monopoly: single seller, no close substitutes, strong barriers to entry, price maker; the demand curve slopes downward and MR < AR.

Monopolistic competition: many sellers, differentiated products, free entry and exit, selling costs and advertising; the firm has some price-setting power.

Oligopoly: few large firms, interdependence in decision-making, kinked demand curve explains price rigidity; entry is difficult.

Profit-maximising condition for all market forms: MR = MC and MC must be rising at the point of intersection (second-order condition).

In the short run a competitive firm may earn supernormal profit (P > AC), normal profit (P = AC) or incur loss (P < AC), but shuts down if P < minimum AVC.

In the long run, free entry and exit under perfect competition drive price to minimum AC, so firms earn only normal profit and P = AR = MR = MC = minimum AC.

Market equilibrium occurs where market demand equals market supply; an excess demand (price below equilibrium) pushes price up, excess supply pushes it down.

Effects of a price ceiling set below equilibrium: shortage, rationing and black marketing; a price floor set above equilibrium: surplus, often requiring government purchase support.

Microeconomics studies individual units - a consumer, a firm, a single market; macroeconomics studies aggregates such as national income and general price level.

Scarcity and choice are the core of the subject: wants are unlimited, resources are limited and have alternative uses, so every choice carries an opportunity cost.

Opportunity cost of a good is the value of the next best alternative forgone; it is measured in real terms, not money alone.

Production possibility frontier is concave to the origin because marginal opportunity cost rises (increasing MOC); points inside are inefficient, points on the curve are full-efficiency combinations, points beyond are unattainable with given resources.

PPF shifts right when resources or technology improve; it shifts outward asymmetrically if only one good's production capacity grows.

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

Market economy solves allocation through the price mechanism; a centrally planned economy uses state directives; a mixed economy combines both.

Positive economics deals with 'what is' and is testable; normative economics deals with 'what ought to be' and involves value judgements.

Micro and macro are complementary, not contradictory: the price of a single commodity is a micro question, the price level of all commodities is a macro question.

Law of diminishing marginal utility: as consumption of a good increases continuously, the utility from each additional unit falls; TU rises while MU is positive, TU is maximum when MU = 0, TU falls when MU is negative.

Total utility is the sum of marginal utilities; MU of the nth unit = TU(n) − TU(n−1).

Consumer's equilibrium in single-commodity case: MU in money terms = price (MUx/Px = MUm); in two-commodity case: MUx/Px = MUy/Py.

Law of equi-marginal utility: a consumer maximises satisfaction by allocating income so that the marginal utility per rupee is equal across all goods.

Indifference curve properties: downward sloping, convex to the origin (diminishing marginal rate of substitution), and higher curves represent higher satisfaction; ICs never intersect.

Budget line equation: Px·X + Py·Y = M; slope = −Px/Py. A change in income shifts the budget line parallel; a change in one price rotates it.

Consumer's equilibrium with indifference curves: the IC is tangent to the budget line, so MRSxy = Px/Py at the point of tangency.

Law of demand: other things equal, quantity demanded rises when price falls and falls when price rises - inverse price–quantity relation, giving a downward-sloping demand curve.

Movement along the demand curve is caused by own price change (change in quantity demanded); a shift of the curve is caused by income, tastes, prices of related goods or population (change in demand).

Production function relates physical inputs to maximum output: Q = f(L, K); short run has at least one fixed factor, long run has all factors variable.

Law of variable proportions: with one factor variable, MP first rises, then falls, then becomes negative; TP rises at an increasing rate, then at a decreasing rate, then falls.

Relationship: AP is rising when MP > AP, falling when MP < AP, and AP is maximum where MP = AP; TP is maximum where MP = 0.

Returns to scale are a long-run concept: increasing, constant and decreasing returns to scale when all inputs are changed in the same proportion.

Cost curves: TC = TFC + TVC; AFC = TFC/Q always falls; AVC and AC are U-shaped; MC cuts AC and AVC at their minimum points.

In the short run AC falls when MC < AC and rises when MC > AC; the vertical gap between AC and AVC equals AFC and shrinks as output rises.

Law of supply: other things equal, quantity supplied rises with price; the supply curve slopes upward. Movement along the curve follows own price; shifts follow input prices, technology, taxes/subsidies or number of firms.

Elasticity of supply Es = (percentage change in quantity supplied) ÷ (percentage change in price); Es > 1 elastic, Es < 1 inelastic, Es = 1 unitary, Es = 0 perfectly inelastic.

Revenue relations: TR = P × Q; MR = ΔTR/ΔQ; under perfect competition P = AR = MR, while under monopoly MR < AR and MR can be negative.

Perfect competition features: very large number of buyers and sellers, homogeneous product, free entry and exit, perfect knowledge, no transport cost - the firm is a price taker and faces a horizontal demand curve.

Monopoly: single seller, no close substitutes, strong barriers to entry, price maker; the demand curve slopes downward and MR < AR.

Monopolistic competition: many sellers, differentiated products, free entry and exit, selling costs and advertising; the firm has some price-setting power.

Oligopoly: few large firms, interdependence in decision-making, kinked demand curve explains price rigidity; entry is difficult.

Profit-maximising condition for all market forms: MR = MC and MC must be rising at the point of intersection (second-order condition).

In the short run a competitive firm may earn supernormal profit (P > AC), normal profit (P = AC) or incur loss (P < AC), but shuts down if P < minimum AVC.

In the long run, free entry and exit under perfect competition drive price to minimum AC, so firms earn only normal profit and P = AR = MR = MC = minimum AC.

Market equilibrium occurs where market demand equals market supply; an excess demand (price below equilibrium) pushes price up, excess supply pushes it down.

Effects of a price ceiling set below equilibrium: shortage, rationing and black marketing; a price floor set above equilibrium: surplus, often requiring government purchase support.

Microeconomics studies individual units - a consumer, a firm, a single market; macroeconomics studies aggregates such as national income and general price level.

Scarcity and choice are the core of the subject: wants are unlimited, resources are limited and have alternative uses, so every choice carries an opportunity cost.

Opportunity cost of a good is the value of the next best alternative forgone; it is measured in real terms, not money alone.

Production possibility frontier is concave to the origin because marginal opportunity cost rises (increasing MOC); points inside are inefficient, points on the curve are full-efficiency combinations, points beyond are unattainable with given resources.

PPF shifts right when resources or technology improve; it shifts outward asymmetrically if only one good's production capacity grows.

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

Market economy solves allocation through the price mechanism; a centrally planned economy uses state directives; a mixed economy combines both.

Positive economics deals with 'what is' and is testable; normative economics deals with 'what ought to be' and involves value judgements.

Micro and macro are complementary, not contradictory: the price of a single commodity is a micro question, the price level of all commodities is a macro question.

Law of diminishing marginal utility: as consumption of a good increases continuously, the utility from each additional unit falls; TU rises while MU is positive, TU is maximum when MU = 0, TU falls when MU is negative.

Total utility is the sum of marginal utilities; MU of the nth unit = TU(n) − TU(n−1).

Consumer's equilibrium in single-commodity case: MU in money terms = price (MUx/Px = MUm); in two-commodity case: MUx/Px = MUy/Py.

Law of equi-marginal utility: a consumer maximises satisfaction by allocating income so that the marginal utility per rupee is equal across all goods.

Indifference curve properties: downward sloping, convex to the origin (diminishing marginal rate of substitution), and higher curves represent higher satisfaction; ICs never intersect.

Budget line equation: Px·X + Py·Y = M; slope = −Px/Py. A change in income shifts the budget line parallel; a change in one price rotates it.

Consumer's equilibrium with indifference curves: the IC is tangent to the budget line, so MRSxy = Px/Py at the point of tangency.

Law of demand: other things equal, quantity demanded rises when price falls and falls when price rises - inverse price–quantity relation, giving a downward-sloping demand curve.

Movement along the demand curve is caused by own price change (change in quantity demanded); a shift of the curve is caused by income, tastes, prices of related goods or population (change in demand).

Production function relates physical inputs to maximum output: Q = f(L, K); short run has at least one fixed factor, long run has all factors variable.

Law of variable proportions: with one factor variable, MP first rises, then falls, then becomes negative; TP rises at an increasing rate, then at a decreasing rate, then falls.

Relationship: AP is rising when MP > AP, falling when MP < AP, and AP is maximum where MP = AP; TP is maximum where MP = 0.

Returns to scale are a long-run concept: increasing, constant and decreasing returns to scale when all inputs are changed in the same proportion.

Cost curves: TC = TFC + TVC; AFC = TFC/Q always falls; AVC and AC are U-shaped; MC cuts AC and AVC at their minimum points.

In the short run AC falls when MC < AC and rises when MC > AC; the vertical gap between AC and AVC equals AFC and shrinks as output rises.

Law of supply: other things equal, quantity supplied rises with price; the supply curve slopes upward. Movement along the curve follows own price; shifts follow input prices, technology, taxes/subsidies or number of firms.

Elasticity of supply Es = (percentage change in quantity supplied) ÷ (percentage change in price); Es > 1 elastic, Es < 1 inelastic, Es = 1 unitary, Es = 0 perfectly inelastic.

Revenue relations: TR = P × Q; MR = ΔTR/ΔQ; under perfect competition P = AR = MR, while under monopoly MR < AR and MR can be negative.

Perfect competition features: very large number of buyers and sellers, homogeneous product, free entry and exit, perfect knowledge, no transport cost - the firm is a price taker and faces a horizontal demand curve.

Monopoly: single seller, no close substitutes, strong barriers to entry, price maker; the demand curve slopes downward and MR < AR.

Monopolistic competition: many sellers, differentiated products, free entry and exit, selling costs and advertising; the firm has some price-setting power.

Oligopoly: few large firms, interdependence in decision-making, kinked demand curve explains price rigidity; entry is difficult.

Profit-maximising condition for all market forms: MR = MC and MC must be rising at the point of intersection (second-order condition).

In the short run a competitive firm may earn supernormal profit (P > AC), normal profit (P = AC) or incur loss (P < AC), but shuts down if P < minimum AVC.

In the long run, free entry and exit under perfect competition drive price to minimum AC, so firms earn only normal profit and P = AR = MR = MC = minimum AC.

Market equilibrium occurs where market demand equals market supply; an excess demand (price below equilibrium) pushes price up, excess supply pushes it down.

Effects of a price ceiling set below equilibrium: shortage, rationing and black marketing; a price floor set above equilibrium: surplus, often requiring government purchase support.

Microeconomics studies individual units - a consumer, a firm, a single market; macroeconomics studies aggregates such as national income and general price level.

Scarcity and choice are the core of the subject: wants are unlimited, resources are limited and have alternative uses, so every choice carries an opportunity cost.

Opportunity cost of a good is the value of the next best alternative forgone; it is measured in real terms, not money alone.

Production possibility frontier is concave to the origin because marginal opportunity cost rises (increasing MOC); points inside are inefficient, points on the curve are full-efficiency combinations, points beyond are unattainable with given resources.

PPF shifts right when resources or technology improve; it shifts outward asymmetrically if only one good's production capacity grows.

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

Market economy solves allocation through the price mechanism; a centrally planned economy uses state directives; a mixed economy combines both.

Positive economics deals with 'what is' and is testable; normative economics deals with 'what ought to be' and involves value judgements.

Micro and macro are complementary, not contradictory: the price of a single commodity is a micro question, the price level of all commodities is a macro question.

Law of diminishing marginal utility: as consumption of a good increases continuously, the utility from each additional unit falls; TU rises while MU is positive, TU is maximum when MU = 0, TU falls when MU is negative.

Total utility is the sum of marginal utilities; MU of the nth unit = TU(n) − TU(n−1).

Consumer's equilibrium in single-commodity case: MU in money terms = price (MUx/Px = MUm); in two-commodity case: MUx/Px = MUy/Py.

Law of equi-marginal utility: a consumer maximises satisfaction by allocating income so that the marginal utility per rupee is equal across all goods.

Indifference curve properties: downward sloping, convex to the origin (diminishing marginal rate of substitution), and higher curves represent higher satisfaction; ICs never intersect.

Budget line equation: Px·X + Py·Y = M; slope = −Px/Py. A change in income shifts the budget line parallel; a change in one price rotates it.

Consumer's equilibrium with indifference curves: the IC is tangent to the budget line, so MRSxy = Px/Py at the point of tangency.

Law of demand: other things equal, quantity demanded rises when price falls and falls when price rises - inverse price–quantity relation, giving a downward-sloping demand curve.

Movement along the demand curve is caused by own price change (change in quantity demanded); a shift of the curve is caused by income, tastes, prices of related goods or population (change in demand).

Production function relates physical inputs to maximum output: Q = f(L, K); short run has at least one fixed factor, long run has all factors variable.

Law of variable proportions: with one factor variable, MP first rises, then falls, then becomes negative; TP rises at an increasing rate, then at a decreasing rate, then falls.

Relationship: AP is rising when MP > AP, falling when MP < AP, and AP is maximum where MP = AP; TP is maximum where MP = 0.

Returns to scale are a long-run concept: increasing, constant and decreasing returns to scale when all inputs are changed in the same proportion.

Cost curves: TC = TFC + TVC; AFC = TFC/Q always falls; AVC and AC are U-shaped; MC cuts AC and AVC at their minimum points.

In the short run AC falls when MC < AC and rises when MC > AC; the vertical gap between AC and AVC equals AFC and shrinks as output rises.

Law of supply: other things equal, quantity supplied rises with price; the supply curve slopes upward. Movement along the curve follows own price; shifts follow input prices, technology, taxes/subsidies or number of firms.

Elasticity of supply Es = (percentage change in quantity supplied) ÷ (percentage change in price); Es > 1 elastic, Es < 1 inelastic, Es = 1 unitary, Es = 0 perfectly inelastic.

Revenue relations: TR = P × Q; MR = ΔTR/ΔQ; under perfect competition P = AR = MR, while under monopoly MR < AR and MR can be negative.

Perfect competition features: very large number of buyers and sellers, homogeneous product, free entry and exit, perfect knowledge, no transport cost - the firm is a price taker and faces a horizontal demand curve.

Monopoly: single seller, no close substitutes, strong barriers to entry, price maker; the demand curve slopes downward and MR < AR.

Monopolistic competition: many sellers, differentiated products, free entry and exit, selling costs and advertising; the firm has some price-setting power.

Oligopoly: few large firms, interdependence in decision-making, kinked demand curve explains price rigidity; entry is difficult.

Profit-maximising condition for all market forms: MR = MC and MC must be rising at the point of intersection (second-order condition).

In the short run a competitive firm may earn supernormal profit (P > AC), normal profit (P = AC) or incur loss (P < AC), but shuts down if P < minimum AVC.

In the long run, free entry and exit under perfect competition drive price to minimum AC, so firms earn only normal profit and P = AR = MR = MC = minimum AC.

Market equilibrium occurs where market demand equals market supply; an excess demand (price below equilibrium) pushes price up, excess supply pushes it down.

Effects of a price ceiling set below equilibrium: shortage, rationing and black marketing; a price floor set above equilibrium: surplus, often requiring government purchase support.

Microeconomics studies individual units - a consumer, a firm, a single market; macroeconomics studies aggregates such as national income and general price level.

Scarcity and choice are the core of the subject: wants are unlimited, resources are limited and have alternative uses, so every choice carries an opportunity cost.

Opportunity cost of a good is the value of the next best alternative forgone; it is measured in real terms, not money alone.

Production possibility frontier is concave to the origin because marginal opportunity cost rises (increasing MOC); points inside are inefficient, points on the curve are full-efficiency combinations, points beyond are unattainable with given resources.

PPF shifts right when resources or technology improve; it shifts outward asymmetrically if only one good's production capacity grows.

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

Market economy solves allocation through the price mechanism; a centrally planned economy uses state directives; a mixed economy combines both.

Positive economics deals with 'what is' and is testable; normative economics deals with 'what ought to be' and involves value judgements.

Micro and macro are complementary, not contradictory: the price of a single commodity is a micro question, the price level of all commodities is a macro question.

Law of diminishing marginal utility: as consumption of a good increases continuously, the utility from each additional unit falls; TU rises while MU is positive, TU is maximum when MU = 0, TU falls when MU is negative.

Total utility is the sum of marginal utilities; MU of the nth unit = TU(n) − TU(n−1).

Consumer's equilibrium in single-commodity case: MU in money terms = price (MUx/Px = MUm); in two-commodity case: MUx/Px = MUy/Py.

Law of equi-marginal utility: a consumer maximises satisfaction by allocating income so that the marginal utility per rupee is equal across all goods.

Indifference curve properties: downward sloping, convex to the origin (diminishing marginal rate of substitution), and higher curves represent higher satisfaction; ICs never intersect.

Budget line equation: Px·X + Py·Y = M; slope = −Px/Py. A change in income shifts the budget line parallel; a change in one price rotates it.

Consumer's equilibrium with indifference curves: the IC is tangent to the budget line, so MRSxy = Px/Py at the point of tangency.

Law of demand: other things equal, quantity demanded rises when price falls and falls when price rises - inverse price–quantity relation, giving a downward-sloping demand curve.

Movement along the demand curve is caused by own price change (change in quantity demanded); a shift of the curve is caused by income, tastes, prices of related goods or population (change in demand).

Production function relates physical inputs to maximum output: Q = f(L, K); short run has at least one fixed factor, long run has all factors variable.

Law of variable proportions: with one factor variable, MP first rises, then falls, then becomes negative; TP rises at an increasing rate, then at a decreasing rate, then falls.

Relationship: AP is rising when MP > AP, falling when MP < AP, and AP is maximum where MP = AP; TP is maximum where MP = 0.

Returns to scale are a long-run concept: increasing, constant and decreasing returns to scale when all inputs are changed in the same proportion.

Cost curves: TC = TFC + TVC; AFC = TFC/Q always falls; AVC and AC are U-shaped; MC cuts AC and AVC at their minimum points.

In the short run AC falls when MC < AC and rises when MC > AC; the vertical gap between AC and AVC equals AFC and shrinks as output rises.

Law of supply: other things equal, quantity supplied rises with price; the supply curve slopes upward. Movement along the curve follows own price; shifts follow input prices, technology, taxes/subsidies or number of firms.

Elasticity of supply Es = (percentage change in quantity supplied) ÷ (percentage change in price); Es > 1 elastic, Es < 1 inelastic, Es = 1 unitary, Es = 0 perfectly inelastic.

Revenue relations: TR = P × Q; MR = ΔTR/ΔQ; under perfect competition P = AR = MR, while under monopoly MR < AR and MR can be negative.

Perfect competition features: very large number of buyers and sellers, homogeneous product, free entry and exit, perfect knowledge, no transport cost - the firm is a price taker and faces a horizontal demand curve.

Monopoly: single seller, no close substitutes, strong barriers to entry, price maker; the demand curve slopes downward and MR < AR.

Monopolistic competition: many sellers, differentiated products, free entry and exit, selling costs and advertising; the firm has some price-setting power.

Oligopoly: few large firms, interdependence in decision-making, kinked demand curve explains price rigidity; entry is difficult.

Profit-maximising condition for all market forms: MR = MC and MC must be rising at the point of intersection (second-order condition).

In the short run a competitive firm may earn supernormal profit (P > AC), normal profit (P = AC) or incur loss (P < AC), but shuts down if P < minimum AVC.

In the long run, free entry and exit under perfect competition drive price to minimum AC, so firms earn only normal profit and P = AR = MR = MC = minimum AC.

Market equilibrium occurs where market demand equals market supply; an excess demand (price below equilibrium) pushes price up, excess supply pushes it down.

Effects of a price ceiling set below equilibrium: shortage, rationing and black marketing; a price floor set above equilibrium: surplus, often requiring government purchase support.

Microeconomics studies individual units - a consumer, a firm, a single market; macroeconomics studies aggregates such as national income and general price level.

Scarcity and choice are the core of the subject: wants are unlimited, resources are limited and have alternative uses, so every choice carries an opportunity cost.

Opportunity cost of a good is the value of the next best alternative forgone; it is measured in real terms, not money alone.

Production possibility frontier is concave to the origin because marginal opportunity cost rises (increasing MOC); points inside are inefficient, points on the curve are full-efficiency combinations, points beyond are unattainable with given resources.

PPF shifts right when resources or technology improve; it shifts outward asymmetrically if only one good's production capacity grows.

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

Market economy solves allocation through the price mechanism; a centrally planned economy uses state directives; a mixed economy combines both.

Positive economics deals with 'what is' and is testable; normative economics deals with 'what ought to be' and involves value judgements.

Micro and macro are complementary, not contradictory: the price of a single commodity is a micro question, the price level of all commodities is a macro question.

Law of diminishing marginal utility: as consumption of a good increases continuously, the utility from each additional unit falls; TU rises while MU is positive, TU is maximum when MU = 0, TU falls when MU is negative.

Total utility is the sum of marginal utilities; MU of the nth unit = TU(n) − TU(n−1).

Consumer's equilibrium in single-commodity case: MU in money terms = price (MUx/Px = MUm); in two-commodity case: MUx/Px = MUy/Py.

Law of equi-marginal utility: a consumer maximises satisfaction by allocating income so that the marginal utility per rupee is equal across all goods.

Indifference curve properties: downward sloping, convex to the origin (diminishing marginal rate of substitution), and higher curves represent higher satisfaction; ICs never intersect.

Budget line equation: Px·X + Py·Y = M; slope = −Px/Py. A change in income shifts the budget line parallel; a change in one price rotates it.

Consumer's equilibrium with indifference curves: the IC is tangent to the budget line, so MRSxy = Px/Py at the point of tangency.

Law of demand: other things equal, quantity demanded rises when price falls and falls when price rises - inverse price–quantity relation, giving a downward-sloping demand curve.

Movement along the demand curve is caused by own price change (change in quantity demanded); a shift of the curve is caused by income, tastes, prices of related goods or population (change in demand).

Production function relates physical inputs to maximum output: Q = f(L, K); short run has at least one fixed factor, long run has all factors variable.

Law of variable proportions: with one factor variable, MP first rises, then falls, then becomes negative; TP rises at an increasing rate, then at a decreasing rate, then falls.

Relationship: AP is rising when MP > AP, falling when MP < AP, and AP is maximum where MP = AP; TP is maximum where MP = 0.

Returns to scale are a long-run concept: increasing, constant and decreasing returns to scale when all inputs are changed in the same proportion.

Cost curves: TC = TFC + TVC; AFC = TFC/Q always falls; AVC and AC are U-shaped; MC cuts AC and AVC at their minimum points.

In the short run AC falls when MC < AC and rises when MC > AC; the vertical gap between AC and AVC equals AFC and shrinks as output rises.

Law of supply: other things equal, quantity supplied rises with price; the supply curve slopes upward. Movement along the curve follows own price; shifts follow input prices, technology, taxes/subsidies or number of firms.

Elasticity of supply Es = (percentage change in quantity supplied) ÷ (percentage change in price); Es > 1 elastic, Es < 1 inelastic, Es = 1 unitary, Es = 0 perfectly inelastic.

Revenue relations: TR = P × Q; MR = ΔTR/ΔQ; under perfect competition P = AR = MR, while under monopoly MR < AR and MR can be negative.

Perfect competition features: very large number of buyers and sellers, homogeneous product, free entry and exit, perfect knowledge, no transport cost - the firm is a price taker and faces a horizontal demand curve.

Monopoly: single seller, no close substitutes, strong barriers to entry, price maker; the demand curve slopes downward and MR < AR.

Monopolistic competition: many sellers, differentiated products, free entry and exit, selling costs and advertising; the firm has some price-setting power.

Oligopoly: few large firms, interdependence in decision-making, kinked demand curve explains price rigidity; entry is difficult.

Profit-maximising condition for all market forms: MR = MC and MC must be rising at the point of intersection (second-order condition).

In the short run a competitive firm may earn supernormal profit (P > AC), normal profit (P = AC) or incur loss (P < AC), but shuts down if P < minimum AVC.

In the long run, free entry and exit under perfect competition drive price to minimum AC, so firms earn only normal profit and P = AR = MR = MC = minimum AC.

Market equilibrium occurs where market demand equals market supply; an excess demand (price below equilibrium) pushes price up, excess supply pushes it down.

Effects of a price ceiling set below equilibrium: shortage, rationing and black marketing; a price floor set above equilibrium: surplus, often requiring government purchase support.