Maharashtra HSC Economics cheat sheet

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

Scarcity means wants are unlimited relative to limited resources; it forces choice, and every choice involves an opportunity cost.

Opportunity cost is the value of the next best alternative forgone, not the sum of all alternatives.

Central problems of every economy: what to produce, how to produce, and for whom to produce; these arise from scarcity and are solved by market, command or mixed mechanisms.

Positive economics is descriptive and testable (what is); normative economics is prescriptive and value-laden (what ought to be).

Production possibility frontier is concave to the origin because marginal opportunity cost rises as resources are shifted between goods; points on the curve are efficient, inside are unemployment/inefficiency, outside are unattainable at given technology.

Stock is a quantity measured at a point of time (wealth, capital); flow is measured over a period (income, saving).

Ceteris paribus means holding other things constant - the assumption that lets a single cause-effect relation be isolated in economic laws.

Total utility (TU) is the sum of satisfaction from all units consumed; marginal utility (MU) is the addition to TU from one more unit: MU = ΔTU/ΔQ.

Law of diminishing marginal utility: as consumption of a good increases, MU from each successive unit falls; TU rises at a decreasing rate and peaks where MU = 0, then falls when MU is negative.

Relation: TU is maximum when MU = 0; TU rises while MU is positive and falls when MU is negative.

Law of equi-marginal utility (consumer equilibrium, one good, money as measuring rod): MUx = Px, i.e. marginal utility of the good equals its price; with two goods MUx/Px = MUy/Py.

Indifference curve: locus of combinations giving equal satisfaction; it slopes downward, is convex to the origin (diminishing marginal rate of substitution), and curves further from the origin represent higher satisfaction.

Indifference curves never intersect, because a single combination cannot yield two different satisfaction levels.

Budget line equation: Px·X + Py·Y = M; slope = −Px/Py. Consumer equilibrium occurs where the budget line is tangent to the highest attainable indifference curve, i.e. MRSxy = Px/Py.

Cardinal utility (Marshall) assumes utility is measurable in utils; ordinal utility (Hicks–Allen) assumes only ranking is possible.

Law of demand: other things equal, quantity demanded rises as price falls - inverse relation; the demand curve slopes downward.

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

Normal goods: demand rises with income; inferior goods: demand falls with income. Substitutes have positive cross-price elasticity; complements have negative cross-price elasticity.

Law of supply: other things equal, quantity supplied rises with price; supply shifts with input costs, technology, taxes/subsidies and number of sellers.

Market equilibrium: quantity demanded equals quantity supplied; price above equilibrium creates a surplus (downward pressure), price below creates a shortage (upward pressure).

Price elasticity of demand (point/percentage method): Ed = (% change in quantity demanded)/(% change in price) = (ΔQ/Q)/(ΔP/P).

Total outlay method: if price change leaves total expenditure unchanged, Ed = 1; expenditure moves opposite to price, Ed > 1 (elastic); expenditure moves with price, Ed < 1 (inelastic).

Ed = 0 is perfectly inelastic (vertical demand curve), Ed = ∞ is perfectly elastic (horizontal demand curve); elasticity falls along a straight-line downward demand curve from top to bottom.

Income elasticity Ey = (%ΔQ)/(%ΔY); cross elasticity Exy = (%ΔQx)/(%ΔPy).

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

Law of variable proportions (short run): total product rises, then rises at a diminishing rate, then falls; marginal product rises, falls, becomes zero, then negative. TP is maximum when MP = 0.

Average product = TP/L; marginal product = ΔTP/ΔL; MP intersects AP at AP's maximum.

Returns to scale (long run): increasing, constant and decreasing returns to scale, described by how output responds when all inputs are scaled proportionally.

Short-run costs: TFC is constant; TVC varies with output; TC = TFC + TVC; AFC = TFC/Q falls continuously; AVC and AC are U-shaped because of the law of variable proportions.

MC = ΔTC/ΔQ; MC cuts AVC and AC at their minimum points; MC lies below AC when AC is falling and above AC when AC is rising.

Revenue: TR = P × Q; AR = TR/Q; MR = ΔTR/ΔQ. Under perfect competition P = AR = MR (horizontal); under monopoly/downward-sloping demand MR < AR and MR falls twice as fast as AR for a linear demand curve.

Break-even output occurs where TR = TC (AR = AC); profit is maximised where MR = MC and MC is rising through that point.

Perfect competition: many sellers, homogeneous product, free entry and exit, perfect knowledge, no transport cost; the firm is a price taker with a horizontal demand curve.

Under perfect competition the firm's short-run equilibrium is at MR = MC, with P = AR = MR; the long run forces P = minimum AC (normal profit only).

Monopoly: single seller, no close substitutes, strong entry barriers; the firm is a price maker facing the industry demand curve and can earn abnormal profit even in the long run.

Monopolistic competition: many sellers with differentiated products, free entry, selling costs and advertising; demand curve is downward sloping but relatively elastic.

Oligopoly: few large firms, interdependence in decision-making, price rigidity (kinked demand curve), and possible collusion or price leadership.

Equilibrium condition for a firm in any market form: MR = MC and MC must cut MR from below; the second condition distinguishes maximum profit from minimum.

Price discrimination charges different prices to different buyers for the same product; it requires market separation and different elasticities of demand.

Shut-down point in the short run: the firm stops producing when price falls below minimum AVC, since fixed costs are sunk.

Macroeconomics deals with aggregates: national income, output, employment, general price level, money supply and balance of payments.

Circular flow: households supply factors and buy goods; firms buy factors and sell goods; in a two-sector model with saving and investment, equilibrium requires S = I.

Three methods of measuring national income: output/product method (sum of value added to avoid double counting), income method (sum of factor incomes), expenditure method (C + I + G + (X − M)).

GDP is output produced within domestic territory; GNP = GDP + net factor income from abroad; NNP = GNP − depreciation; NNP at factor cost = national income.

Personal income is income received by households before personal taxes; disposable income = personal income − personal taxes.

Nominal vs real GDP: real GDP = (nominal GDP / price index) × 100; GDP deflator = (nominal GDP / real GDP) × 100.

Avoid double counting by counting only value added or final goods; exclude transfer payments, second-hand sales, intermediate goods and purely financial transactions.

Difficulties in measuring national income in a developing economy: non-monetised transactions, illiteracy, unorganised sectors, double counting and inadequate data.

Functions of money: medium of exchange, measure of value, store of value, standard of deferred payment; legal tender is money a creditor must accept.

Money supply measures: M1 = currency with public + demand deposits + other deposits with RBI; M2 = M1 + post office savings deposits; M3 = M1 + time deposits; M4 = M3 + total post office deposits (M3 is the broad measure most used).

Commercial banks create credit through the deposit multiplier: total deposits = initial deposit × 1/reserve ratio.

Central bank functions: currency issue, banker to government, banker to banks, lender of last resort, credit control, custodian of foreign exchange reserves.

Quantitative credit control: bank rate, repo rate, reverse repo rate, cash reserve ratio, statutory liquidity ratio and open market operations.

Qualitative credit control: margin requirements, moral suasion, credit rationing, direct action and selective credit controls.

Public finance covers government revenue, expenditure, debt and financial administration; a budget is an annual statement of estimated receipts and expenditure.

Budget types: balanced (receipts = expenditure), surplus (receipts > expenditure) and deficit (expenditure > receipts); fiscal deficit = total expenditure − total receipts excluding borrowings.

Direct taxes are levied on income and wealth and cannot be shifted (income tax, corporation tax); indirect taxes are levied on goods and services and can be shifted (GST, excise, customs).

Absolute advantage: a country produces a good using fewer resources; comparative advantage: it produces at a lower opportunity cost - the basis for mutually beneficial trade.

Balance of trade = value of exports − value of imports of goods; balance of payments is a wider record of all external transactions, including invisibles and capital flows.

Current account covers goods, services, income and transfers; capital account covers investment, loans and reserves changes; the BoP always balances overall through reserve movements.

Exchange rate: appreciation raises the currency's external value (exports dearer, imports cheaper); depreciation lowers it (exports cheaper, imports dearer).

Terms of trade = (index of export prices / index of import prices) × 100; a rise means better terms of trade.

Trade policy instruments: tariffs, quotas, subsidies, voluntary export restraints and import licensing; protectionism aims to shield domestic industry.

Economic growth is a quantitative rise in real output; economic development includes growth plus qualitative change in living standards, health, education and inequality.

Human Development Index combines life expectancy, education (schooling and expected years) and per capita income (GNI) into a geometric mean between 0 and 1.

Indicators of development: per capita income, HDI, poverty ratio, literacy rate, infant mortality rate and life expectancy.

Planning is a deliberate, organised effort by government to direct resources towards predetermined socio-economic goals.

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

NITI Aayog replaced the Planning Commission in 2015 as a policy think tank; it promotes cooperative and competitive federalism rather than allocating plan funds.

Five-Year Plans ran from 1951–52 to 2017; the Twelfth Five-Year Plan (2012–17) was the last, after which the plan holiday approach was adopted.

Structural reforms of 1991: liberalisation, privatisation and globalisation (LPG) - reduction of licensing, opening to foreign investment, and reform of trade and financial sectors.

Poverty estimation in India historically used the Tendulkar and Rangarajan committees; the Multidimensional Poverty Index measures deprivation across health, education and standard of living.

Major anti-poverty and employment programmes include MGNREGA (rural employment guarantee), PMAY (housing) and the Public Distribution System for food security.

Inclusive growth requires that the benefits of growth reach all sections, particularly women, Scheduled Castes and Tribes, and rural populations.

Primary sector: agriculture, forestry, fishing and mining; secondary: manufacturing, electricity and construction; tertiary: trade, transport, banking, insurance and services.

India's structural shift shows a falling share of agriculture in GDP with a rising share of services; employment shift has been slower than output shift.

Green Revolution raised foodgrain output through HYV seeds, irrigation, fertilisers and mechanisation; it was concentrated in wheat-growing regions.

Land reforms aimed at abolition of intermediaries, tenancy reform and land ceilings; small and fragmented holdings remain a problem.

Infrastructure includes transport, power, communication and irrigation; poor infrastructure raises costs and limits growth.

Human capital formation is investment in education, health, training and migration that raises productivity.

Liberalisation reduced industrial licensing through the New Industrial Policy of 1991; the MRTP Act was replaced by the Competition Act, 2002.

Sustainable development meets present needs without compromising the ability of future generations to meet theirs; it requires balancing growth with resource use and pollution control.

The Reserve Bank of India, established in 1935 and nationalised in 1949, is the central bank and monetary authority.

Monetary policy is announced by the Monetary Policy Committee, which targets consumer price inflation at 4% with a tolerance band of ±2%.

Repo rate is the rate at which the RBI lends short-term funds to banks against securities; reverse repo is the rate at which it absorbs liquidity.

Cash Reserve Ratio is the share of net demand and time liabilities held as cash with the RBI; SLR is the share held in approved securities and cash.

An increase in CRR or SLR reduces the money supply; an open market sale of securities also reduces liquidity.

Commercial banks accept deposits and lend; primary deposits create credit, and secondary deposits result from lending activity.

Non-performing assets are loans where interest or principal is overdue; high NPAs reduce bank profitability and lending capacity.

Financial inclusion aims to bring unbanked households into the formal financial system; Jan Dhan accounts, Aadhaar and mobile banking are key instruments.

Public expenditure is classified as plan/non-plan or revenue/capital; capital expenditure creates assets while revenue expenditure does not.

Revenue receipts are non-debt creating (tax and non-tax revenue); capital receipts include borrowings and disinvestment and create liabilities or reduce assets.

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

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

Fiscal policy uses government spending and taxation to influence aggregate demand, employment and price stability.

Deficit financing means financing a deficit by borrowing or money creation; excessive use can raise inflation and crowd out private investment.

GST is a destination-based indirect tax on value added, subsuming many central and state taxes; it is levied at the final consumption point.

Public debt is internal (borrowed domestically) or external (borrowed abroad); internal debt redistributes income within the country, external debt creates a foreign exchange obligation.

IMF promotes monetary cooperation and short-term balance-of-payments stability; its quotas determine voting power and access to finance.

World Bank (IBRD) provides long-term development finance for infrastructure and poverty reduction; IDA gives concessional loans to poor countries.

WTO, established in 1995, administers trade rules, settles disputes and promotes reduction of tariffs and non-tariff barriers.

SAFTA and ASEAN–India agreements are regional trade arrangements that reduce tariffs among members.

Foreign direct investment brings capital, technology and management control; foreign portfolio investment buys financial assets without control.

Special Economic Zones offer tax and regulatory incentives to promote exports and industrial investment.

Dumping is selling abroad below domestic or cost price; anti-dumping duties are countervailing measures permitted under WTO rules.

The balance of payments crisis of 1991 was met with IMF-supported stabilisation and structural adjustment reforms.

Growth is a quantitative increase in real national income; development adds qualitative improvement in welfare, equity and capability.

Per capita income = national income / population; it is an average and hides income distribution.

HDI = geometric mean of life expectancy index, education index and GNI per capita index; values range from 0 to 1.

The Human Poverty Index and Multidimensional Poverty Index measure deprivation in health, education and living standards rather than income alone.

Gini coefficient measures income inequality from 0 (perfect equality) to 1 (perfect inequality).

Sustainable development goals set by the UN include poverty, hunger, health, education, gender equality, clean energy and climate action.

Population growth affects development through dependency ratio, pressure on resources and labour supply; demographic dividend occurs when the working-age share is high.

Unemployment types: frictional, structural, cyclical and disguised (common in Indian agriculture).

Agriculture contributes a declining share of GDP but employs the largest share of the workforce, indicating low productivity.

Agricultural credit comes from cooperative banks, regional rural banks, commercial banks and NABARD refinance.

Minimum Support Price is announced by the government to protect farmers from price falls; procurement is largely through the Food Corporation of India.

Small-scale industries are labour-intensive and generate employment but face credit, technology and marketing constraints.

Industrial policy since 1991 removed licensing for most industries, opened sectors to private and foreign investment and reduced public-sector monopoly.

Services such as information technology, banking, trade and transport have become the fastest-growing sector and a major source of export earnings.

Make in India and Skill India aim to raise manufacturing share and employability; infrastructure investment is a key constraint on industrial growth.

Disguised unemployment in agriculture means more workers are engaged than needed, so removing some does not reduce output.

Monetary policy affects money supply, credit and interest rates; fiscal policy affects government spending and taxes.

Expansionary policy (lower rates, higher spending) raises aggregate demand; contractionary policy reduces inflation.

Inflation is a sustained rise in the general price level; demand-pull inflation comes from excess demand, cost-push from rising input costs.

Deflation is a fall in the general price level; disinflation is a fall in the rate of inflation; stagflation is high inflation with high unemployment.

Exchange rate regimes: fixed (pegged) and floating; India follows a managed float.

Devaluation is a deliberate official reduction in a fixed exchange rate; depreciation is a market-driven fall under floating rates.

Current account deficit occurs when imports of goods and services exceed exports; it may be financed by capital inflows.

Foreign exchange reserves held by the RBI include foreign currency assets, gold, SDRs and reserve position with the IMF.

Mean = sum of observations / number of observations; it is affected by extreme values.

Median is the middle value of ordered data; it is unaffected by extreme values and is useful for skewed distributions.

Mode is the most frequently occurring value; a distribution may be bimodal or have no mode.

Arithmetic mean of grouped data = Σ(fx)/Σf, where x is the class midpoint and f the frequency.

Range = maximum − minimum; standard deviation is the square root of variance, which is the mean of squared deviations from the mean.

Correlation measures the degree of linear association between two variables, ranging from −1 to +1; zero means no linear association.

Index numbers measure relative change over time; a price index = (current year price / base year price) × 100.

A bar diagram compares discrete categories; a pie chart shows shares of a whole; a line graph shows change over time.

The Consumer Protection Act, 2019 defines a consumer as a person who buys goods or hires services for consideration, excluding commercial purpose.

Consumer rights include safety, information, choice, redressal, and the right to be heard and to consumer education.

Three-tier redressal machinery: District Commission, State Commission and National Commission, with pecuniary jurisdiction increasing at each level.

A complaint may be filed within two years of the cause of action; the limitation may be condoned on sufficient cause.

Unfair trade practices include false representation, misleading advertisement, and refusal to take back defective goods.

The RTI Act, 2005 gives citizens the right to seek information from public authorities within a prescribed time.

The Competition Act, 2002 prohibits anti-competitive agreements and abuse of dominant position, and regulates combinations.

The Right to Education Act, 2009 guarantees free and compulsory education to children aged 6 to 14 years.

Quantity theory of money: MV = PT (Fisher) or MV = PY; if velocity and output are constant, money supply changes translate into price changes.

Inflation rate = [(price index in current year − price index in base year) / price index in base year] × 100.

Consumer Price Index measures retail prices of a basket of consumer goods; Wholesale Price Index measures wholesale prices and excludes services.

Real interest rate = nominal interest rate − inflation rate (approximation).

Inflation redistributes income from creditors to debtors and from fixed-income earners to profit earners.

Measures to control inflation: monetary (raise repo, CRR, SLR, sell securities) and fiscal (cut spending, raise taxes, reduce deficit).

Money illusion occurs when people confuse nominal and real values; real income = nominal income / price index × 100.

Deflationary gap is the shortfall of aggregate demand below full-employment output; inflationary gap is the excess.

Aggregate demand = C + I + G + (X − M); equilibrium output occurs where aggregate demand equals aggregate supply (Y).

Consumption function: C = a + bY, where a is autonomous consumption and b is the marginal propensity to consume.

MPC = ΔC/ΔY; MPS = ΔS/ΔY; MPC + MPS = 1.

Investment multiplier k = 1/(1 − MPC) = 1/MPS; a higher MPC gives a larger multiplier.

Saving and investment equality is the equilibrium condition in a two-sector model: S = I at equilibrium income.

Paradox of thrift: an attempt by all households to save more can reduce aggregate demand and hence national income.

Automatic stabilisers such as progressive taxes and unemployment benefits dampen fluctuations without discretionary action.

Disposable income = Y − T; consumption depends on disposable income, not gross income.

Budget receipts are revenue receipts (tax and non-tax) and capital receipts (borrowings, disinvestment, recoveries of loans).

Budget expenditure is revenue expenditure (salaries, interest, subsidies) and capital expenditure (asset creation, loans to states).

Direct tax incidence falls on the person who pays it; indirect tax can be shifted forward to the consumer.

Progressive tax takes a larger proportion of income from higher incomes; regressive tax takes a larger proportion from lower incomes; proportional tax takes the same proportion from all.

Tax evasion is illegal non-payment; tax avoidance is legal use of loopholes to reduce liability.

Fiscal deficit indicates total borrowing requirement; revenue deficit shows that the government is borrowing for consumption.

Crowding out occurs when government borrowing raises interest rates and reduces private investment.

Zero-base budgeting starts each year's budget from scratch rather than from the previous year's figures.

Mercantilism held that exports are good and imports bad and that a nation's wealth is its stock of gold.

Adam Smith's absolute advantage and Ricardo's comparative advantage show that trade can benefit both countries even if one is absolutely less efficient.

Heckscher–Ohlin theory explains trade by differences in factor endowments: countries export goods intensive in their abundant factor.

Free trade raises global output through specialisation; protection may be justified for infant industries, national defence and revenue.

Tariff is a tax on imports; quota is a quantity limit; both raise domestic prices and reduce consumer surplus.

Terms of trade improve when export prices rise relative to import prices.

Foreign exchange market: demand for foreign currency comes from imports and capital outflows; supply comes from exports and capital inflows.

Purchasing power parity holds that exchange rates adjust so that identical goods cost the same across countries in the long run.

Balanced growth invests simultaneously across sectors to create demand; unbalanced growth concentrates investment in leading sectors to induce growth elsewhere.

Import substitution industrialisation protects domestic industry from imports; export-led growth promotes outward-oriented manufacturing.

Human capital formation through education and health raises productivity and is a key development strategy.

Poverty line is the expenditure needed to buy a minimum calorie basket; the headcount ratio measures the proportion below the line.

Income inequality is measured by the Lorenz curve and Gini coefficient; a Lorenz curve closer to the diagonal indicates greater equality.

Unemployment rate = (unemployed / labour force) × 100; labour force participation rate = labour force / population × 100.

Inflation targeting, fiscal discipline and institutional quality are considered important for stable development.

Sustainable development requires intergenerational equity, precautionary resource use and pollution control.

Money as a medium of exchange removes the double coincidence of wants required under barter.

Legal tender must be accepted in settlement of debt; cheques and cards are not legal tender.

High-powered money = currency with public + cash reserves of banks with the RBI.

Money multiplier = 1/reserve ratio; it shows how bank deposits expand from a given reserve base.

Central bank controls credit through quantitative and qualitative instruments; repo operations are the main liquidity tool in India.

Bank rate is the long-term lending rate of the central bank; it influences other interest rates.

Open market operations buy or sell government securities to inject or absorb liquidity.

Moral suasion is persuasion by the central bank rather than a binding rule.

Demographic transition moves from high birth and death rates to low birth and death rates through declining death rates first.

Demographic dividend is the economic benefit from a large working-age population relative to dependents.

Poverty alleviation programmes include MGNREGA, PMAY, National Rural Livelihood Mission and the Public Distribution System.

Unemployment types in India include open, disguised, seasonal and educated unemployment.

Skill development and vocational training aim to raise employability of the young labour force.

Migration from rural to urban areas is driven by push factors (low farm income) and pull factors (urban jobs).

Female labour force participation in India is relatively low, limiting potential output.

Human capital formation requires spending on education, health and nutrition, which raises productivity.

Mean deviation = Σ|x − mean|/n; it uses absolute deviations and ignores signs.

Variance = Σ(x − mean)²/n for a population; standard deviation is its square root.

Coefficient of variation = (standard deviation / mean) × 100; it compares variability across series with different units.

Quartile deviation = (Q3 − Q1)/2; it measures spread of the middle 50% of data.

Laspeyres price index uses base-year quantities; Paasche uses current-year quantities; Fisher's ideal index is the geometric mean of the two.

A base year should be a normal year free from abnormal fluctuations.

Index numbers are used to measure changes in prices, production and cost of living.

A wholesale price index excludes services, while the consumer price index includes them.

Government intervention corrects market failure from public goods, externalities and monopoly.

Public goods are non-rival and non-excludable, so markets underprovide them and government financing is needed.

Externalities are spillover costs or benefits not reflected in market prices; a negative externality causes overproduction.

Merit goods are subsidised because society values consumption above private willingness to pay.

Public debt sustainability depends on the debt-to-GDP ratio and the growth–interest rate differential.

Fiscal consolidation reduces deficits to stabilise debt and support macroeconomic stability.

Grants-in-aid from the Centre to States are recommended by the Finance Commission.

Tax buoyancy measures the responsiveness of tax revenue to changes in national income.

Balance of payments records all economic transactions between residents and non-residents in a year.

Current account includes merchandise trade, services, primary income and secondary income transfers.

Capital account includes foreign investment, loans, banking capital and reserve changes.

A current account deficit must be financed by net capital inflows or by drawing down reserves.

Nominal exchange rate is the rate quoted in the market; real exchange rate adjusts for relative price levels.

Currency appreciation makes exports costlier abroad and imports cheaper at home.

A managed float allows market determination with occasional central bank intervention.

Foreign exchange reserves provide a buffer against external shocks and support import cover.

Harrod–Domar model: growth rate = saving rate / capital–output ratio; higher savings or lower capital intensity raise growth.

Solow growth model adds technological progress as the source of long-run growth.

Rostow's stages of growth: traditional society, preconditions, take-off, drive to maturity, age of high mass consumption.

Lewis dual-sector model explains structural change through transfer of surplus labour from agriculture to industry.

Big push theory argues for simultaneous investment across sectors to escape a low-level equilibrium trap.

Human capital theory treats education and health spending as investment yielding future returns.

Capability approach (Sen) measures development by freedoms and functionings rather than income alone.

Sustainable development indicators include adjusted net savings and the genuine progress indicator.

The 1991 reforms devalued the rupee, dismantled industrial licensing and opened the economy to foreign investment.

Disinvestment is the sale of government equity in public sector undertakings.

Financial sector reforms established SEBI as regulator, reduced statutory pre-emptions and strengthened banking supervision.

The Insolvency and Bankruptcy Code, 2016 provides a time-bound resolution process for distressed firms.

Demonetisation of 2016 removed high-denomination notes to curb black money and promote digital payments.

GST introduced a unified indirect tax structure with input tax credit to remove cascading.

Startup India and Digital India promote entrepreneurship and digital infrastructure.

Climate commitments include reducing emissions intensity and expanding renewable energy capacity.

Perfectly inelastic supply has a vertical supply curve; perfectly elastic supply is horizontal.

Elasticity of supply measures responsiveness of quantity supplied to price: Es = (ΔQ/Q)/(ΔP/P).

Incidence of a tax falls more heavily on the side of the market that is less elastic.

Price ceiling set below equilibrium creates a shortage; price floor set above equilibrium creates a surplus.

Consumer surplus is the area below the demand curve and above the price; producer surplus is the area above the supply curve and below the price.

Deadweight loss arises when quantity traded is below the equilibrium level.

Cross elasticity sign identifies substitutes (positive) and complements (negative).

Income elasticity greater than one indicates a luxury good; between zero and one indicates a necessity.

IS–LM framework shows equilibrium in goods market (IS) and money market (LM); their intersection determines income and interest rate.

Expansionary fiscal policy shifts IS right, raising income and interest rate; the interest rise may crowd out investment.

Expansionary monetary policy shifts LM right, lowering the interest rate and raising income.

Aggregate supply curve slopes upward in the short run due to sticky wages and prices; it is vertical in the long run at potential output.

Phillips curve shows a short-run trade-off between inflation and unemployment; the long-run curve is vertical at the natural rate.

Rational expectations reduce the effectiveness of anticipated policy.

Automatic stabilisers and discretionary policy both aim to smooth the business cycle.

Supply-side policies aim to raise potential output through education, infrastructure and deregulation.

Primary data are collected first-hand; secondary data are already collected by others.

Methods of primary collection: direct personal interview, indirect oral interview, questionnaire by mail, and observation.

A census covers every unit of the population; sampling covers a selected representative part.

Random sampling gives every unit an equal chance of selection; stratified sampling divides the population into homogeneous groups.

Frequency distribution groups data into classes; class mark is the midpoint of a class interval.

A histogram represents a continuous frequency distribution with adjacent bars.

An ogive is a cumulative frequency curve; it can be used to locate median and quartiles graphically.

Sampling error arises from observing a sample rather than the whole population; non-sampling error arises from faulty measurement or recording.

Factors of production: land, labour, capital and entrepreneurship; each earns rent, wages, interest and profit respectively.

Marginal revenue product of labour = marginal product × price of output; a profit-maximising firm hires until MRP equals the wage rate.

Demand for a factor is derived from the demand for the good it helps produce.

Supply of labour depends on wage rate, population, skills and working conditions.

Rent is the payment for the use of land; economic rent is the surplus over transfer earnings.

Quasi-rent is a short-run surplus earned by a factor whose supply is temporarily fixed.

Monopsony is a market with a single buyer, which can pay lower prices or wages.

Collective bargaining by trade unions can raise wages above the competitive level, reducing employment in the short run.

Agriculture supports livelihoods for nearly half the workforce but contributes less than a fifth of GDP.

Food security is pursued through procurement, buffer stocks and the Public Distribution System.

Industrial growth in India has been constrained by infrastructure bottlenecks, credit access and regulatory delays.

Services exports, especially software, are a major source of foreign exchange.

MSMEs contribute significantly to employment and exports but face credit and technology gaps.

The Insolvency and Bankruptcy Code and GST improved the business environment.

Urbanisation creates demand for housing, transport and civic infrastructure.

Inclusive growth requires attention to lagging regions, gender gaps and informal employment.

Adam Smith's Wealth of Nations (1776) argued that the invisible hand of self-interest allocates resources efficiently.

Malthus warned that population grows geometrically while food supply grows arithmetically.

Ricardo developed comparative advantage and the theory of rent.

Marx analysed capitalism through surplus value and class conflict.

Marshall systematised marginal utility and demand analysis.

Keynes argued that aggregate demand determines output and employment and advocated active fiscal policy.

Schumpeter emphasised innovation and entrepreneurship as drivers of development.

Sen and Bhagwati contributed to welfare economics and trade theory respectively.

Balanced budget means receipts equal expenditure; a surplus budget means receipts exceed expenditure.

Fiscal deficit = total expenditure − total receipts excluding borrowings.

Revenue deficit = revenue expenditure − revenue receipts.

Primary deficit = fiscal deficit − interest payments.

Monetised deficit is the part of the fiscal deficit financed by the central bank through money creation.

Deficit financing can be inflationary if it outpaces real output growth.

Public account includes provident funds and small savings, which are not part of the consolidated fund.

The Finance Bill gives effect to the government's taxation proposals.

Tariffs raise revenue and protect domestic producers but raise consumer prices.

Non-tariff barriers include quotas, licensing, standards and sanitary regulations.

The WTO's most-favoured-nation principle requires equal treatment of trading partners.

National treatment requires imported and domestic goods be treated alike once inside a market.

Dispute settlement in the WTO provides a rules-based mechanism for trade conflicts.

Regional trade agreements grant preferential access among members but may divert trade from efficient non-members.

The IMF provides short-term balance-of-payments support with conditionality.

The World Bank provides long-term project and development finance.

Absolute poverty compares income to a fixed minimum; relative poverty compares income to the distribution in a society.

Poverty gap measures the depth of poverty as the shortfall from the poverty line.

Lorenz curve plots cumulative population against cumulative income; the Gini coefficient is derived from it.

Kuznets curve hypothesises that inequality first rises and then falls with development.

Human capital formation through education and health raises productivity and earnings.

Gender inequality in education and employment reduces growth potential.

Social safety nets protect vulnerable groups during shocks.

Microfinance provides small loans to the poor who lack collateral.

Scatter diagrams show the direction and strength of association between two variables.

Karl Pearson's coefficient of correlation r = Σxy/(nσxσy), ranging from −1 to +1.

Rank correlation is used when data are qualitative or ordinal.

Regression estimates the value of one variable from another; the regression line minimises squared deviations.

Regression coefficients measure the change in the dependent variable for a unit change in the independent variable.

Correlation does not imply causation.

Coefficient of determination R² measures the proportion of variation explained by the regression.

Time series has trend, seasonal, cyclical and irregular components.

Inflation in India is measured by CPI (combined) and WPI; the RBI targets CPI inflation.

Food and fuel prices have large weights in the CPI basket and drive short-run inflation.

Financial inclusion schemes include Jan Dhan accounts, Aadhaar and mobile banking (JAM trinity).

Digital payments have expanded through UPI and mobile wallets.

Non-performing assets reduce bank profitability and credit growth.

Priority sector lending requires banks to lend a share of credit to agriculture, MSMEs and weaker sections.

Microfinance institutions serve borrowers without collateral, often through joint liability groups.

Financial literacy improves saving and borrowing decisions among households.

In an open economy, aggregate demand includes net exports: AD = C + I + G + (X − M).

The multiplier in an open economy is smaller because part of demand leaks into imports.

Marginal propensity to import reduces the domestic multiplier effect.

Capital mobility affects the effectiveness of monetary and fiscal policy under different exchange rate regimes.

Under a fixed exchange rate with perfect capital mobility, monetary policy is ineffective; fiscal policy is effective.

Under a floating exchange rate with perfect capital mobility, monetary policy is effective; fiscal policy is weakened by currency appreciation.

The J-curve shows that the trade balance may worsen before improving after depreciation.

Exchange rate pass-through measures how much currency changes feed into domestic prices.

The Planning Commission was set up in 1950 to formulate Five-Year Plans.

NITI Aayog was set up in 2015 as a policy think tank with the Prime Minister as chairperson.

The Finance Commission recommends distribution of tax revenue between the Centre and States.

The GST Council decides GST rates and is chaired by the Union Finance Minister.

The Monetary Policy Committee sets the policy repo rate to achieve the inflation target.

SEBI regulates securities markets; IRDAI regulates insurance; RBI regulates banks and payment systems.

The Competition Commission of India enforces competition law.

The National Statistical Office publishes GDP and other macroeconomic data.

Negative externalities such as pollution are not priced by markets, causing overproduction.

Pigouvian tax equals the marginal external cost and corrects the externality.

Cap-and-trade systems set a total pollution limit and allow permits to be traded.

Common pool resources are rival but non-excludable and tend to be overused.

Sustainable development requires that resource use not reduce the capital stock available to future generations.

Renewable energy reduces dependence on fossil fuels and lowers emissions.

Climate change is a global externality requiring international cooperation.

Green GDP adjusts national income for environmental degradation.

Market failure occurs when the market does not allocate resources efficiently.

Sources of market failure: public goods, externalities, imperfect competition and information asymmetry.

Public goods are non-rival and non-excludable, leading to free-rider behaviour.

Merit goods are under-consumed without subsidies; demerit goods are over-consumed without taxes.

Price controls can create shortages or surpluses and reduce welfare.

Regulation of monopolies aims to prevent abuse of market power.

Information asymmetry can lead to adverse selection and moral hazard.

Government failure occurs when intervention makes outcomes worse.

Landholding size in India is small and fragmented, limiting mechanisation.

Irrigation covers only part of cultivated area, making output weather-dependent.

Minimum Support Price protects farmers against price falls for notified crops.

Agricultural marketing reforms aim to reduce intermediation and improve price realisation.

Rural infrastructure such as roads, electricity and storage reduces post-harvest losses.

Rural non-farm employment diversifies income and reduces dependence on agriculture.

Self-help groups and microfinance improve rural access to credit.

Contract farming links farmers to processors and markets.

Export-led growth has been a successful strategy for several East Asian economies.

Import substitution protects domestic industry but can reduce efficiency and competitiveness.

Trade can transmit technology and knowledge through imports and foreign investment.

Terms of trade deterioration can reduce the gains from trade for primary exporters.

Trade liberalisation can increase inequality if adjustment is slow.

Foreign direct investment can bring capital, technology and jobs but may crowd out domestic firms.

Regional integration can expand markets but may divert trade.

Aid for trade supports developing countries in building trade capacity.

A population is the entire set of units; a sample is a subset used to draw inferences.

Random sampling avoids selection bias.

Sample size affects the reliability of estimates; larger samples reduce sampling error.

A frequency table summarises data by counting observations in each class.

Measures of central tendency summarise a distribution by a single representative value.

Measures of dispersion describe how spread out the data are.

Graphical presentation aids interpretation of data.

Misleading graphs can distort interpretation through truncated axes or inappropriate scales.

HDI combines health, education and income into a single index between 0 and 1.

The Human Development Report is published by UNDP.

The capability approach focuses on what people are able to do and be.

Gender Development Index and Gender Inequality Index measure gender disparities.

The Multidimensional Poverty Index counts deprivations in health, education and living standards.

Social sector spending on health and education raises human development.

Public health and nutrition programmes improve productivity.

Education quality matters as much as enrolment for development outcomes.

Industrial policy since 1991 reduced licensing and opened sectors to private and foreign investment.

Infrastructure includes power, transport, communication and water.

Power sector reforms aim to reduce losses and improve distribution.

Roads and railways are major determinants of logistics costs.

Special Economic Zones offer incentives to promote exports.

Make in India aims to raise manufacturing share of GDP.

MSMEs face credit constraints and technological gaps.

Digital infrastructure supports e-commerce and financial inclusion.