Tamil Nadu HSE Second Year Economics flashcards
Tamil Nadu HSE Second Year Economics · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Robbins' definition
- The definition of economics as the science studying human behaviour as a relationship between unlimited ends and scarce means with alternative uses, given by Lionel Robbins in 1932.
- Opportunity cost
- The value of the next best alternative forgone when a resource or income is used for one purpose instead of another.
- Production possibility frontier
- A curve showing the maximum combinations of two goods an economy can produce with given resources and technology; concave because marginal opportunity cost rises.
- Consumer surplus
- The excess of the price a consumer is willing to pay for a good over the price actually paid, equal to total utility minus total expenditure.
- Law of diminishing marginal utility
- As a consumer consumes more units of a commodity in a given period, the additional satisfaction obtained from each extra unit falls.
- Indifference curve
- A curve showing combinations of two goods giving the consumer equal satisfaction; it slopes downward and is convex to the origin.
- Marginal rate of substitution
- The rate at which a consumer is willing to give up one good to obtain one more unit of another while keeping satisfaction constant; it equals the slope of the indifference curve.
- Price elasticity of demand
- The percentage change in quantity demanded divided by the percentage change in price; demand is elastic if the value exceeds one.
- Law of variable proportions
- In the short run, as more units of a variable factor are applied to fixed factors, marginal product first rises, then falls, and eventually becomes negative.
- Marginal cost
- The addition to total cost from producing one more unit of output; it cuts average cost at the minimum point of average cost.
- Returns to scale
- The long-run response of output when all factors of production are increased in the same proportion, giving increasing, constant, or decreasing returns.
- Perfect competition
- A market with many buyers and sellers, a homogeneous product, free entry and exit, and perfect knowledge, so each firm is a price taker.
- Monopoly equilibrium
- A single seller maximises profit where marginal revenue equals marginal cost, charging a price above marginal cost with barriers preventing entry.
- Kinked demand curve
- An oligopoly model where the demand curve is more elastic above the ruling price and less elastic below it, explaining price rigidity.
- Product differentiation
- Real or imaginary differences in brand, quality, packaging, or location that make a firm's product distinct under monopolistic competition.
- Transfer earnings
- The minimum amount a factor must earn to remain in its present use; any payment above it is economic rent.
- Ricardian theory of rent
- Rent is the payment for the original and indestructible powers of the soil, arising from differences in fertility and diminishing returns on marginal land.
- Liquidity preference theory
- Keynes' explanation that interest is the reward for parting with liquidity, determined by the supply of and demand for money.
- Gross domestic product
- The market value of all final goods and services produced within a country's domestic territory during a year, valued at current or constant prices.
- National income at factor cost
- Net national product at factor cost, obtained by subtracting depreciation from gross national product and adjusting for net factor income from abroad.
- GDP deflator
- A price index computed as nominal GDP divided by real GDP multiplied by one hundred, measuring the change in the general price level of all goods produced.
- Money multiplier
- The ratio of total money supply to reserve money, equal to one divided by the reserve ratio in the simple credit creation model.
- Cash reserve ratio
- The proportion of a bank's net demand and time liabilities that must be held as cash reserves with the Reserve Bank of India.
- Demand-pull inflation
- Inflation caused by aggregate demand rising faster than aggregate supply, described as too much money chasing too few goods.
- Fiscal deficit
- Total government expenditure minus total receipts excluding borrowings; it measures the government's borrowing requirement in a year.
- Direct tax
- A tax levied on income or wealth whose burden falls on the person who pays it and cannot be shifted to others, such as income tax.
- Balance of payments
- A systematic record of all economic transactions of a country with the rest of the world, covering current and capital accounts, which always balances in accounting terms.
- Comparative advantage
- Ricardo's principle that a country gains from trade by specialising in goods it produces at lower opportunity cost than its trading partner.
- Devaluation
- A deliberate official reduction in the value of a country's currency in terms of foreign currency under a fixed exchange rate system.
- Mahalanobis strategy
- India's Second Five Year Plan approach emphasising heavy and basic industries to build capital goods capacity, with a closed economy orientation.
- New Economic Policy 1991
- India's reforms introducing liberalisation, privatisation, and globalisation, reducing licensing, lowering tariffs, and opening the economy to foreign investment.
- Sectoral shift in India
- The long-run decline in agriculture's share of GDP and the rise of services, while agriculture continues to employ the largest share of workers.