Tamil Nadu HSE Second Year Economics key terms

The satisfaction a consumer derives from consuming a good or service. Total utility is the sum of satisfaction from all units consumed, while marginal utility is the extra satisfaction gained from one more unit.

As a consumer consumes more units of a commodity in a given period, the additional satisfaction obtained from each successive unit falls, other things remaining constant.

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

The number of units of one good a consumer is willing to give up to obtain one additional unit of another good while staying on the same indifference curve, that is, at unchanged satisfaction.

Other things being equal, quantity demanded of a commodity rises when its price falls and falls when its price rises, giving an inverse relationship between price and quantity demanded.

The degree of responsiveness of quantity demanded to a change in the commodity's own price, measured as percentage change in quantity demanded divided by percentage change in price.

The responsiveness of quantity demanded to a change in consumer income, calculated as the percentage change in quantity demanded divided by the percentage change in income.

The technological relationship showing the maximum output obtainable from alternative combinations of inputs, given the existing state of technology and assuming technical efficiency.

In the short run, as more units of a variable input are added to fixed inputs, marginal product first rises, then falls, and may eventually become negative.

The behaviour of output when all inputs are increased in the same proportion. It may be increasing, constant or decreasing, and is a long-run concept.

Cost that does not change with the level of output in the short run, such as rent on a building or insurance, and is incurred even when output is zero.

Cost that varies directly with the quantity of output produced, such as expenditure on raw materials and casual labour, and is zero when output is zero.

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

A market structure with many buyers and sellers, a homogeneous product, free entry and exit, perfect information, and firms that are price takers facing a horizontal demand curve.

A market with a single seller of a product having no close substitutes, with strong barriers to entry, so the firm is a price maker facing the entire market demand curve.

A market with many sellers of differentiated but closely substitutable products, free entry and exit, and firms competing through product differentiation, branding and selling costs.

Making a product appear distinct from rival products through differences in quality, design, brand name, packaging or service, giving the seller some control over its price.

Charging different prices to different buyers for the same product or service, not justified by differences in the cost of supplying them, typically practised by a monopolist.

The payment made for the use of a factor of production whose supply is perfectly inelastic, such as land, and which is a surplus over its transfer earnings.

The minimum payment required to keep a factor of production in its present use, equal to what it could earn in its next best alternative employment.

A temporary surplus earned by a factor or firm in the short run because of inelastic supply of a durable asset whose supply becomes elastic in the long run.

The money value of all final goods and services produced within a country's domestic territory during a year, valued at market prices and counted without double counting.

The sum of factor incomes earned by normal residents of a country in a year, comprising compensation of employees, rent, interest, profit and mixed income, net of indirect taxes and subsidies.

Gross national product minus depreciation, that is, the value of final output available to residents after allowing for the consumption of fixed capital used up in production.

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

The process by which commercial banks expand deposits by lending out a part of the deposits they receive, subject to the cash reserve ratio, thereby multiplying the money supply.

The proportion of a bank's net demand and time liabilities that must be kept as cash reserves with the central bank, used as a tool of monetary policy.

The rate at which the central bank lends short-term funds to commercial banks against government securities, used to influence liquidity and the cost of credit.

A sustained rise in the general price level of goods and services in an economy over a period, which reduces the purchasing power of money.

A measure of the average change over time in the prices paid by households for a fixed basket of consumer goods and services, widely used to estimate inflation.

The excess of total government expenditure over total receipts excluding borrowings, showing the amount the government must borrow to meet its spending.

The total liabilities of the government arising from past borrowing, comprising internal debt owed to domestic lenders and external debt owed to foreign lenders.

A tax under which the rate of tax rises as the taxpayer's income rises, so the tax takes a larger proportion of income from higher-income earners.

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

A situation where a country's payments for imports of goods and services, plus net income and transfers abroad, exceed its receipts from exports and inflows on the current account.

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

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

A composite index measuring average achievement in three dimensions of human development: health, education and standard of living, used to compare development across countries.

A national development plan setting out targets and priorities for a five-year period, used in India from 1951 to 2017 to guide public investment and growth.