economics

• production is the creation of various goods and services which are to be consumed by society. whatever is used in the production process is called input or factors of production and whatever is obtained is called output.


  Creation of utility - 1.changing the form of the commodity , form commodity.2. changing the place of the commodity, place utility. 3. rendering services[service utility]. 4. creating a stock of goods one time and selling it another time[time utility]
• Factors of production- are those goods and services with the help of which the process of production is carried out.
• land-is not only land surface but all gifts of nature, to be considered an agent of production the gifts should be amenable to human control

  labour- is the physical and mental effort that is exerted out od humans in producing a commodity with an intention to earn money.


  capital- is the physical stock of produced means of production

  entrepreneurship- is the person who takes the risks of business and coordinates the working of all other factors of production
• Productivity of land[def]-is the capacity of a piece of land to produce a crop .


  Effeciency of labour-it is the productive capacity of a worker
• division of labour means specialisation in work , under it the worker specialises either in production of a single commodity or a single sub process.
• physical capital consists of tangible human made goods which assist in the process of creating a commodity


  financial capital is assets needed by a company to provide goods and services measured in terms of money
• Capital formation is the increase in stock of capital goods which are used for more production
• Market refers to the whole area where buyers and sellers of a commodity are in competition with each other to effect the purchase and sale of the commodity.
• Perfect competition is a market situation in which there a large number of buyers and sellers selling identical products


  Monopoly is a market situation in which there is a single seller and a large number of buyers . Buyers have no option but to buy from the seller.
• monopolistic competition- is a market situation in which there are large number of small buyers and sellers selling closely related products but not homogeneous.


  oligopoly is that situation in which there are a few large sellers of a commodity. individual seller has a large share in total supply and can influence activities of other sellers and prices of the commodity
• pure oligopoly is when products of the firms are homogeneous.


  differentiated oligopoly is when products of different firms are different but close substitutes of one another
• collusive oligopoly is when there is an agreement among firms to set the price and set individual firms output levels


  non-collusive oligopoly is when firms operate on their own and set their prices and output levels independendently .
• public expenditure is the expenditure incurred by the public authorities to satisfy those wants that people in their individual capacity cannot satisfy efficiently .


  public debt is loans raised by the govt within or outside the country.
• revenue expenditure includes all current expenditure on administration such as railways. this is also called current expenditure.


  capital expenditure includes all capital transactions including defence transactions of public commercial undertakings.
• DEMAND is the quantity of a good or service a consumer is willing and able to buy at given prices during a period of time . 


  JOINT DEMAND is when two or more goods are demanded together. it is also known as complementary demand .
• COMPOSITE DEMAND is the demand for a commodity which can be put to several uses. 


  DIRECT DEMAND is when a commodity is demanded directly by a consumer to satisfy of his want.
• DERIVED DEMAND is when a thing is needed to produce some other goods. 


  COMPETITIVE DEMAND is when two commodities are close substitutes of one another . An increase in quantity demanded of one commodity will reduce the demand for another.
• INDIVIDUAL DEMAND refers to the demand for a commodity by an individual consumer. 


  MARKET DEMAND refers to the total demand for a commodity that all individual households are willing to buy at a given price during a period of time.
• THE LAW OF DEMAND states the inverse relationship between price of a commodity and quantity demanded of that commodity. It states that other things being equal , quantity demanded will rise with a fall in price and quantity demanded will fall with a rise in price. Law of demand is a qualitative concept because it indicates direction of change and not magnitude of change. 


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• ELASTICITY OF DEMAND is the ratio between percentage change in demand in response to percentage change in price. 


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• BARTER is economic exchanges without the use of money
• MONEY is any good widely used and accepted in making transactions 


  Limited legal tender money is that money which no person can be forced to accept after a certain limit.[ example coins]

  Unlimited legal tender money is that money that is accepted to an unlimited extent . [example currency notes]
• MEDIUM OF EXCHANGE is an intermediatory instrument which is used in making transactions of goods and services. 


  MEASURE OF VALUE is the monetary expression of the market value of goods and services.
• STANDARD OF DEFFERED PAYMENTS refer to those payments that are to be made in the future . 


  STORE OF VALUE means store of wealth for use in future .
• PUBLIC FINANCE is that part of economics where we discuss the revenue and expenditure operations of the government.
• INTERNAL DEBT is debt raised by government within the country from individuals or institutions within the country 


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• PRODUCTIVE DEBT is debts which are used by the government for those projects which yield income . 


  UNPRODUCTIVE DEBT is debts used by government for projects that don't yield any income.
• REEDEMABLE DEBTS are debts that are repayable by the government after a fixed period of time. 


  IRREEDEMABLE DEBTS are debts that the government does not repay.
• FUNDED DEBTS are long term debts whose payment is made at least after a year or may not be made at all. 


  UNFUNDED DEBTS is for a short period of less than a year.
• VOLUNTARY DEBTS is debts taken by the people on a voluntary basis. 


  INVOLUNTARY DEBTS are debts which are forcibly taken from the people by the govt.
• GROSS DEBT is the sum of all debts outstanding 


  NET DEBT is the sum of debts after exclusion of assets meant for repayment of loams.
• COMMERCIAL BANK is a financial institution that accepts deposits and gives loans for the purposes of consumption and investment. 


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• INFLATION is a situation in which prices rise persistently at a fast pace . 


  WHOLESALE PRICE INDEX is the index number which represents overage change in price level of goods and services . it indicates change is general price level in an economy .
• CONSUMER PRICE INDEX measures the average change in the price paid by the ultimate consumer for a specifies basket of goods and services 


  FOOD BASKET consists of specifies food items of daily individual consumption.
• CREEPING INFLATION is when rise in prices is really slow. the rate of inflation is 2% per annum and it is regarded safe and essential for economic growth . 


  WALKING INFLATION is when prices rise moderately . The rate of inflation is 3 to 6 % per annum and it is a warning sign for the government to control it before it turns to running inflation.
• RUNNING INFLATION is when rise is prices is rapid and the rate of inflation is 10 to 20 % per annum. This kind affects the poor and middle class adversely and their economic position becomes worse . the government should control it before it turns to hyperinflation. 


  HYPERINFLATION is when the rate of inflation is 20 to 100 % per annum . this kind brings total collapse to the monetary system. The prices rise every moment .
• DEMAND PULL INFLATION is when prices rise because the demand for goods and services exceeds its supply available at current prices. 


  COST PUSH INFLATION is inflation caused by cost factors. Prices are pushed up due to rise in cost of production.
• CREDIT is the exchange of goods in the present for use in the future. 


  CREDIT CREATION is when commercial banks increase the supply of money by creating demand deposits in the process of giving loans.
• PRIMARY DEPOSITS are cash deposits that are kept with the commercial banks and are made by the people . 


  SECONDARY DEPOSITS are deposits which arise due to transfer of loan amount to the borrowers account .
• LEGAL RESERVE RATIO is the small fraction of demand deposits the commercial banks are required to maintain with themselves. 


  MONEY MULTIPLIER is when the commercial banks in process of giving loans are able to create money through secondary deposits much more than initial deposits, the multiple by which total deposits increase is called money multiplier.