Indian Economy

Notes to remember
Production is at socially ideal level under perfect competition.
Profit is a residual earning.
New firms are barred from entering the market in monopoly.
Keynes says: 'The propensity to consume is stable in the short run.'
The supply of the commodity does not depend directly upon the demand for the commodity.
Capital information in an economy depends on total savings.
The supply of a commodity depends directly upon:
1) cost of production
2) price of commodity
3) technology of production.
Price cost is equal to variable cost plus administrative cost.
An expenditure that has been made and cannot be recovered is called sunk cost.
J. B. Say propounded the 'market law'.
John Maynard Keynes is not a classical economist.
David Ricardo, John Stuart Mill and Thomas Malthus are classical economists.
Prof. Amartya Sen was awarded Nobel Prize for his contribution to the field of Welfare economics.
Nobel Prize in Economics field is not paid out of the endowment set up by Dr. Alfred Nobel.
Price is needed for creating demand.
Adam Smith said, 'Economics is the science of wealth.'
Production function expresses financial relationship between physical inputs and outputs.
According to Keynes 'Interest is a reward for parting with liquidity for a specific period.'
Extension or contraction of quality demanded of a commodity is a result of change in the unit price of the commodity.
For price discrimination to be successful, the elasticity of demand for the product in the two markets should be different.
The 'law of demand' expresses effect of change in demand of a commodity on its price.
When average cost of production falls, marginal cost of production must be less than the average cost.
A fall in demand or rise in supply of a commodity decreases the price of that commodity.
An exceptional demand curve is one that moves upward to the right.
Production function explains the relationship between initial inputs and ultimate output.
Revealed preference theory was propounded by P. A. Samuelson.
In Economics the term 'utility' and 'usefulness' have different meaning.
Laissez faire is a feature of capitalism.
In perfect competition, the marginal revenue curve coincide with average revenue curve.
According to J. A. Schumpeter, entrepreneurs are entitled to enjoy the profit for their innovative activities.
Demonstration effect means imitating effect of consumption.
Homogeneous product is a feature of perfect competition.
The relationship between the value of money and the price level in an economy is inverse.
If two commodities are complements, then their cross price elasticity is negative.
Opportunity cost of production of a commodity is the next best alternative output sacrificed.
Surplus earned by a factor other than land in the short period is referred to as Quasi-rent.
When the interest rate in the economy goes up:
1) saving increases
2) lending decreases
3) cost of production increases
4) return on capital does not increase.
Labour intensive technique would get choosen in a labour surplus economy.
A 'want' becomes 'demand' only when it is backed by the ability to purchase.
The terms 'microeconomics' and 'macroeconomics' were coined by Ragner Frisch.
The statement, 'Economics is what it out to be' refers to Normative economics.
The excess of price, a person is to pay rather than forego the consumption of the commodity is called Producer's surplus.
When the price of a commodity falls, we can expect the demand for it to increase.
Utility in economics means the capacity to satisfy human wants.

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