RBSE SS Economics key terms

The condition in which available resources are limited relative to the unlimited wants of people, forcing choices about what to produce and consume.

The value of the next best alternative forgone when a resource is used for one purpose rather than another.

A curve showing the maximum combinations of two goods an economy can produce when all resources are fully and efficiently employed, given its technology.

The branch of economics that studies individual units such as a consumer, a firm, or a single market, and how prices are determined there.

The branch of economics that studies the economy as a whole, focusing on aggregates such as national income, general price level, and total employment.

The satisfaction or want-satisfying power a consumer derives from consuming a good or service at a particular time.

The principle that as a consumer takes successive units of a good, the additional satisfaction from each extra unit falls, other things remaining unchanged.

The statement that, other things being equal, quantity demanded of a good rises when its price falls and falls when its price rises.

A graph plotting the quantity of a good consumers are willing and able to buy at each price, usually sloping downward from left to right.

A change in the whole demand relationship caused by factors other than the good's own price, such as income, tastes, or prices of related goods.

A good whose demand increases when consumer income rises, so that income and quantity demanded move in the same direction.

A good whose demand falls when consumer income rises because buyers switch to preferred substitutes as they become richer.

The percentage change in quantity demanded divided by the percentage change in price, measuring how responsive buyers are to price movements.

A way of judging elasticity by observing how total spending on a good changes when its price changes: same spending means unit elastic.

A curve showing all combinations of two goods that give a consumer equal satisfaction, so the consumer is indifferent among them.

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

The short-run principle that as more units of a variable input are added to fixed inputs, marginal product first rises, then falls, and may turn negative.

The addition to total output resulting from employing one more unit of a variable input while other inputs are held constant.

Total output divided by the number of units of a variable input employed, showing output per unit of that input.

The behaviour of output when all inputs are increased in the same proportion, giving increasing, constant, or decreasing returns in the long run.

Cost that a firm must bear in the short run even when output is zero, because it arises from fixed inputs such as plant and machinery.

Cost that changes directly with the level of output, arising from inputs like raw material and casual labour that vary with production.

The addition to total cost from producing one more unit of output, equal to the change in total cost divided by the change in quantity.

A graph showing the quantity of a good producers are willing to sell at each price, normally sloping upward because higher prices encourage more output.

The statement that, other things being equal, quantity supplied of a good rises with its price and falls when the price falls.

A market structure with many small sellers of an identical product, free entry and exit, and no individual firm able to influence price.

A market with a single seller of a product having no close substitutes, protected by barriers that prevent other firms from entering.

A market with many sellers offering differentiated but closely substitutable products, where each firm has some limited power over its price.

Making a product appear distinct from rivals' products through brand name, packaging, quality, or location, giving the seller some pricing power.

The price at which quantity demanded equals quantity supplied, so the market clears and there is neither shortage nor surplus.

Charging different buyers different prices for the same good or service, where the price difference is not justified by differences in cost.

The total money value of all final goods and services produced by a country's normal residents during an accounting year.

The market value of all final goods and services produced within a country's domestic territory during a given period, regardless of producer nationality.

The difference between factor income earned by a country's residents from abroad and factor income paid to non-residents within the country.

A payment made without any good or service being produced in return, such as a pension or scholarship, and therefore excluded from national income.

The total stock of money held by the public at a point in time, measured in aggregates such as M1, M2, M3 and M4.

The apex monetary institution of a country that issues currency, controls credit, and acts as banker to the government and to commercial banks.

A financial institution that accepts deposits from the public and lends them out, thereby creating credit in the economy.

The process by which commercial banks expand deposits by lending out a fraction of the deposits they receive, generating new deposits in the system.

The proportion of a bank's net demand and time liabilities that it must keep as cash reserves with the central bank.

The rate at which the central bank lends short-term funds to commercial banks against approved securities, used as a tool of monetary policy.

The fraction of each additional rupee of income that households spend on consumption, equal to change in consumption divided by change in income.

The relationship between total consumption expenditure and the level of income, showing that consumption rises as income rises but by less.

The number by which an initial change in investment or government spending is multiplied to give the resulting change in national income.

An annual statement of the estimated receipts and expenditure of the government for a financial year, reflecting its fiscal policy.

Government spending that neither creates an asset nor reduces a liability, such as salaries, pensions and interest payments.

Government spending that either creates an asset or reduces a liability, such as building roads or repaying public debt.

The excess of total government expenditure over total receipts excluding borrowings, showing how much the government must borrow.

The excess of revenue expenditure over revenue receipts, indicating that current spending is not covered by current income.

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

The part of the balance of payments covering trade in goods and services, factor income, and unilateral transfers between countries.

The price of one country's currency expressed in units of another country's currency, determined by demand and supply or by official fixing.

A fall in the value of a domestic currency in terms of foreign currency under a market-determined exchange rate system.

A deliberate official reduction in the value of a domestic currency in terms of foreign currency under a fixed exchange rate system.

The set of policy changes introduced in 1991 covering liberalisation, privatisation and globalisation, aimed at raising growth and efficiency.

The removal or relaxation of government controls such as industrial licensing and trade restrictions so that market forces guide economic decisions.

The integration of a country's economy with the world economy through freer movement of goods, services, capital and technology across borders.