PSEB SS Economics key terms

The satisfaction or want-satisfying power a consumer gets from consuming a good or service. It is subjective and measured in imaginary units called utils in cardinal analysis.

The addition to total satisfaction from consuming one more unit of a commodity in a given period, other things unchanged. It can be positive, zero, or negative.

As a consumer takes more units of a good in a short period, the extra satisfaction from each additional unit falls, eventually reaching zero and then turning negative.

A consumer maximises satisfaction by allocating spending so that the marginal utility per rupee is equal across all goods purchased, subject to the budget.

A curve showing all combinations of two goods that give a consumer the same total satisfaction, so the consumer is equally willing to choose any point on it.

The amount of one good a consumer is willing to give up to obtain one more unit of another good while keeping satisfaction constant; it equals the slope of an indifference curve.

A line showing all combinations of two goods a consumer can buy by spending the entire given income at given prices; its slope reflects the price ratio.

The quantity of a commodity a consumer is willing and able to buy at a given price during a given period, other factors held constant.

Other things equal, quantity demanded of a good rises when its price falls and falls when its price rises, giving an inverse price-quantity relationship.

A measure of how responsive quantity demanded is to a change in price, income, or the price of a related good; price elasticity is the percentage change in quantity divided by the percentage change in price.

The technical relationship showing the maximum output obtainable from given quantities of inputs with the available technology, usually written for two inputs in the short run.

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.

The change in total output resulting from employing one additional unit of a variable input, holding other inputs constant.

Total output divided by the number of units of the variable input employed; it is output per unit of the variable factor.

The behaviour of output when all inputs are increased in the same proportion in the long run; output may rise more than, less than, or exactly in proportion.

Cost that does not vary with the level of output in the short run, such as rent on a factory; it is incurred even when output is zero.

Cost that changes 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 is the change in total cost divided by the change in quantity.

Total cost divided by output; it combines average fixed cost and average variable cost and typically falls then rises, giving a U-shaped curve.

The quantity of a good a firm is willing to offer for sale at a given price during a given period, other things remaining constant.

Other things equal, quantity supplied of a good rises with its price and falls when the price falls, giving a direct relationship between price and quantity offered.

A market structure with many small buyers and sellers, a homogeneous product, free entry and exit, and perfect information, so 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, so the firm is a price maker facing a downward-sloping demand curve.

A market with many sellers offering differentiated products with free entry and exit, so each firm has some price-setting power but faces competition from close substitutes.

A market dominated by a few large sellers whose decisions are interdependent, so each firm must consider the likely reactions of rivals when setting price or output.

Charging different prices to different buyers for the same product, or the same price for products with different costs, when markets can be separated.

The money value of all final goods and services produced by a country's normal residents during a year, counting each good only once to avoid double counting.

Gross domestic product: the market value of all final goods and services produced within a country's domestic territory during a year, regardless of who produces them.

The market value of all final goods and services produced by the normal residents of a country in a year, including net factor income from abroad.

The difference between factor income earned by residents from abroad and factor income earned by non-residents within the country; it links domestic product to national product.

Anything generally accepted as a medium of exchange, a unit of account, a store of value, and a standard of deferred payment in an economy.

The total stock of money held by the public at a point of time; narrow money includes currency and demand deposits, while broad money adds time deposits.

The process by which commercial banks expand deposits by lending out a fraction of the deposits they receive, limited by the cash reserve ratio.

A financial institution that accepts deposits from the public and lends money to borrowers, thereby creating credit and providing payment services.

The apex monetary authority of a country, which issues currency, controls credit, acts as banker to the government and banks, and manages foreign exchange reserves.

The excess of total government expenditure over total receipts excluding borrowing; it shows how much the government must borrow to fund spending.

The excess of total expenditure over total receipts other than borrowings; it measures the total borrowing requirement of the government in a year.

An annual statement of the estimated receipts and expenditure of a government, used to plan taxation, spending, and borrowing for the coming year.

A systematic record of all economic transactions between a country's residents and the rest of the world during a year, comprising the current and capital accounts.

The part of the balance of payments recording trade in goods and services, primary income such as investment income, and secondary income such as remittances.

The price of one country's currency expressed in units of another currency, determined in a floating system by demand and supply in the foreign exchange market.

A fall in the value of a domestic currency in terms of foreign currency under a floating exchange rate system, making exports cheaper and imports dearer.

A rise in the value of a domestic currency in terms of foreign currency under a floating exchange rate system, making exports dearer and imports cheaper.

The process of increasing the knowledge, skills, and health of a population through education, training, and health spending, raising productivity and future income.

A sustained increase in a country's real national income or output over time, usually measured as the annual percentage change in real GDP.