Economic Systems and Microeconomics Overview

The study of how individuals and firms make decisions in the face of scarcity.

An economic system where resources are allocated based on traditions and customs passed down over generations.

An economic system where the government controls the allocation of resources and sets prices.

An economic system driven by the forces of supply and demand, where individuals and businesses make decisions freely.

An economic system that combines elements of both command and market economies.

The quantity of a good or service producers are willing to offer at a given price.

The quantity of a good or service consumers are willing to buy at a given price.

The point where the quantity supplied and the quantity demanded are equal, determining the market price.

A situation where the decisions of one economic agent impact the well-being of others, often without compensation.

A scenario where markets fail to efficiently allocate resources, leading to inefficient outcomes.

A tool governments use to manage the economy through taxes and spending. Increasing spending or reducing taxes can stimulate the economy. Decreasing spending or increasing taxes can help control inflation.

A tool central banks use to manage the economy through control of the money supply and interest rates. Lowering interest rates or increasing the money supply can stimulate growth. Raising interest rates or decreasing the money supply can help control inflation.

The exchange of goods and services between countries.

The relative value of one currency to another. It impacts the cost of imports and exports, influencing trade flows and economic competitiveness.

The distribution of income and wealth within a society. Economists study how income is distributed and the impact of inequality on economic outcomes.

Income earned by workers in the form of wages, salaries, and other benefits.

Income earned by businesses after covering all costs like labor, materials, and depreciation.

Income earned from assets like land, capital, and financial instruments.

The difference between taxes businesses pay on production & imports, and the subsidies they receive.

Income received without active participation, such as interest on savings, dividends from investments, and rental income.

Money or assets received as gifts or inheritances are considered nonfactor incomes, as they are not earned through productive efforts.

Unexpected gains, such as lottery winnings or unexpected bonuses, are considered nonfactor incomes, as they don't involve active participation in production.

Income that is not derived from the production of goods and services. It's also known as transfer income.

The price consumers actually pay for a good or service, reflecting production costs, taxes and subsidies.

Economic data measured in current prices without adjusting for inflation.

Economic data adjusted to remove the effects of inflation, providing a more accurate picture of changes in the quantity or value of goods and services over time.

The difference between the Market Price and Factor Cost, representing taxes added to the price of production.

The difference between the Factor Cost and Market Price, representing subsidies subtracted from the price of production.

The cost of producing a good or service, including direct costs like labor and materials.

The price paid for a good or service, including all taxes and subsidies.

The price paid for a good or service, excluding taxes and subsidies.

A measure of the average income earned by each person in a country or region.

The total income (usually GDP) of a country or region divided by its population. It helps us understand how well-off a country is, on average.

The growth of per capita income can lead to higher living standards, more spending, and investments in education and healthcare.

Despite growth, India's per capita income remains relatively low compared to other nations.

The increase in India's per capita income is expected to be significant in the future because of its growing economy.

Per capita income is used to assess the overall economic prosperity of a nation and how wealth is distributed.

It helps compare the standard of living in different countries and make international economic comparisons.

A key indicator used to assess economic well-being and the standard of living of the population.

The total value of all final goods and services produced within a country's borders in a specific period, typically a year.

NDP is GDP minus depreciation, which is the wear and tear of capital goods over time.

NNI is NDP adjusted for taxes, subsidies, and income earned by residents abroad.

National income data provide insights into a country's overall economic performance, helping to assess growth, resource allocation, and policy effectiveness.

National income data helps governments allocate resources by informing them which sectors of the economy are performing well and which require more support.

Strong economic performance, reflected in national income data, can enhance a country's global credibility, influencing its trade relationships and borrowing ability.

By comparing national income data before and after policy implementation, policymakers can evaluate the effectiveness of their economic strategies.