Net Economics #Classical Economists and their work# Economic theory

 Net Economics #Classical Economists and their work# Economic theory Pls follow , like and share Classical economics, also known as classical political economy, is a school of economic thought that emerged in the late 18th and early 19th centuries. It laid the foundation for modern economics and was dominant until the late 19th century. Classical economists focused on understanding the mechanisms of economic growth, production, and distribution of goods and services in market economies significant contributions and the years in which they were active: Adam Smith (1723-1790): Major Work: "The Wealth of Nations" (1776) Contributions: Smith is often referred to as the father of economics. In "The Wealth of Nations," he introduced the concept of the invisible hand, arguing that individuals pursuing their own self-interest in a free market economy unintentionally promote the general welfare. He also discussed the division of labor, productivity, and the role of markets i

Net Economics Important Interpretation in one place

 

Net Economics  Important Interpretation in one place


MICRO Economics 

Microeconomics is the branch of economics that deals with the behavior of individual economic units such as consumers, firms, and resource owners. Here are some important definitions in microeconomics:


Supply and Demand: The fundamental concept in microeconomics where the price and quantity of goods in the market are determined by the balance between what producers are willing to supply and what consumers are willing to buy.


Elasticity: A measure of how sensitive the quantity demanded or supplied of a good is to changes in price, income, or other factors.


Utility: The satisfaction or pleasure derived from consuming goods and services. It is a fundamental concept in understanding consumer behavior.


Costs of Production: The expenses incurred by firms in the process of producing goods and services, including fixed and variable costs.


Perfect Competition: A market structure in which there are many small firms, identical products, and no barriers to entry. Prices are determined solely by supply and demand.


Monopoly: A market structure in which there is only one producer or seller for a product. The monopolist has significant control over the price and supply of the product.


Oligopoly: A market structure in which a small number of large firms dominate the market. These firms have the ability to influence the market price and other market outcomes.


Market Failure: When the market fails to allocate resources efficiently, leading to an overallocation or underallocation of resources. Market failures can occur due to externalities, public goods, asymmetric information, and monopolies.


Game Theory: A branch of microeconomics that deals with the strategic interactions between different players in a situation involving choices of actions, analyzing their behaviors and outcomes.


Consumer Surplus and Producer Surplus: Concepts used to measure the benefits that consumers and producers receive when the market price for a good or service is lower or higher than their willingness to pay or receive.


MACRO Economics 


Gross Domestic Product (GDP): The total monetary value of all goods and services produced within a country's borders within a specific time period. It is a key indicator of a nation's economic performance.


Inflation: The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Central banks often target a specific inflation rate as a monetary policy goal.


Unemployment Rate: The percentage of the labor force that is jobless and actively seeking employment. It is a crucial measure of economic health and labor market conditions.


Fiscal Policy: The use of government spending and taxation to influence the economy. Governments use fiscal policy to stabilize the economy, promote economic growth, and control inflation.


Monetary Policy: The management of the money supply and interest rates by a central bank (such as the Federal Reserve in the United States) to control inflation and stabilize the economy.


Budget Deficit: When a government's expenditures exceed its revenues in a fiscal year. It leads to an increase in national debt.


National Debt: The total amount of money that a country's government has borrowed, typically over many years. It is the accumulation of all past deficits and surpluses.


Trade Balance: The difference between a country's exports and imports of goods and services. A surplus occurs when exports exceed imports, and a deficit occurs when imports exceed exports.
Interest Rate: The cost of borrowing money, usually expressed as a percentage. Changes in interest rates influence consumer spending, business investments, and overall economic growth.


Economic Growth: An increase in the production of goods and services in an economy over a period of time, often measured as the percentage change in GDP.
Business Cycle: The recurring pattern of expansion and contraction in economic activity that occurs over time. It consists of phases such as recession, recovery, and expansion.


Aggregate Demand and Aggregate Supply: Aggregate demand represents the total quantity of goods and services demanded by households, businesses, government, and foreign buyers at different price levels. Aggregate supply represents the total quantity of goods and services that producers in an economy are willing and able  to produce  


Mathematical Economics 


Function: In mathematics, a function is a relation between a set of inputs (independent variable) and a set of possible outputs (dependent variable) such that each input is related to exactly one output.


Derivative: The derivative of a function represents the rate at which the output of the function changes with respect to the change in the input. It is a fundamental concept in calculus and is often used to model marginal changes in economics.


Integral: The integral of a function represents the area under the curve of the function. In economics, integrals are used to calculate total quantities, such as total consumer surplus or total producer surplus.


Optimization: Optimization involves finding the best solution to a problem from all possible solutions. In economics, optimization techniques are used to find the maximum or minimum of functions representing utility, profit, cost, etc.


Equilibrium: A state in which opposing forces or factors are balanced. In economics, equilibrium refers to a situation where demand equals supply, and there is no tendency for prices or quantities to change.


Partial Derivative: A derivative of a function of several variables with respect to one variable, treating the remaining variables as constants. It measures how the function changes as one variable changes, holding other variables constant.


Elasticity: In mathematical economics, elasticity measures the responsiveness of demand or supply to changes in price or income. It is often calculated using derivatives.


Differential Equations: Mathematical equations that involve derivatives. They are used in economics to model dynamic processes, such as economic growth, population growth, and investment over time.


Matrix: A mathematical structure consisting of an ordered set of numbers arranged in rows and columns. Matrices are used in various economic models, including input-output analysis and simultaneous equations systems.


Game Theory: The study of mathematical models of strategic interactions among rational decision-makers. Game theory is used to analyze economic and social situations where individuals or organizations make decisions interdependently.




 Econometrics 


Econometrics is the branch of economics that applies statistical and mathematical methods to analyze economic data and test economic theories. 


Regression Analysis: A statistical method used to examine the relationship between two or more variables. In econometrics, regression analysis is widely used to estimate the effect of one or more independent variables on a dependent variable.


Independent Variable: A variable that is manipulated or varied in an experiment or analysis. It is used to predict or explain changes in the dependent variable.


Dependent Variable: A variable being studied and tested in an experiment. It represents the output or outcome whose variation is being studied.


OLS (Ordinary Least Squares) Regression: A common method in econometrics for estimating the parameters of a linear regression model. It minimizes the sum of the squared differences between observed and predicted values.


Heteroskedasticity: A term used to describe the situation in which the variance of errors (residuals) in a regression model is not constant across all levels of the independent variables. Dealing with heteroskedasticity is important for accurate statistical inference.
Multicollinearity: A phenomenon in which two or more independent variables in a regression model are highly correlated, making it difficult to assess the individual effect of each variable.


Autocorrelation: The correlation of a signal with a delayed copy of itself. In econometrics, autocorrelation often occurs in time series data, indicating that the observations are not independent over time.


Endogeneity: A situation in which an explanatory variable in a regression model is correlated with the error term. It can lead to biased and inefficient parameter estimates.


Instrumental Variables: Variables used in econometric techniques to address endogeneity issues by providing an external source of variation for the potentially endogenous explanatory variable.


Time Series Analysis: A statistical method used to analyze time-ordered data points. It is commonly used in econometrics to study economic indicators and other time-based data.


Causality: The relationship between cause and effect, indicating that a change in one variable leads to a change in another variable. Establishing causality is a central goal in econometric analysis.
Understanding these econometric concepts is crucial for conducting empirical research in economics and drawing meaningful conclusions 


Money and Banking


Money: Money is any widely accepted medium of exchange used for transactions, as well as a store of value and a unit of account. It can st in various curencies, or even certain commodities historically used as money.


Currency: Currency refers to physical forms of money, such as coins and paper notes, issued by the government and used as a medium of exchange in an economy.


Central Bank: A central bank is an institution responsible for managing a country's monetary policy, issuing currency, regulating banks, and controlling the money supply. Examples include the Federal Reserve in the United States and the European Central Bank in the Eurozone.RBI in India 


Commercial Bank: Commercial banks are financial institutions that accept deposits from the public and provide loans to individuals, businesses, and governments. They play a crucial role in the creation of money through the lending process


Fractional Reserve Banking: Fractional reserve banking is a system in which banks are required to hold only a fraction of their customers' deposits in reserve. The rest can be lent out, effectively creating new money.


Interest Rate: Interest rate is the cost of borrowing money, usually expressed as a percentage of the loan amount. It is set by central banks and influences economic activity, investment, and inflation.


Monetary Policy: Monetary policy refers to the management of the money supply and interest rates by a central bank to control inflation and stabilize the economy. Central banks use tools like open market operations and changes in interest rates to implement monetary policy.


Inflation: Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks often aim to maintain stable inflation rates to support economic growth.


Deflation: Deflation is the opposite of inflation, indicating a decrease in the general price level of goods and services. It can lead to reduced consumer spending and economic slowdown.


Liquidity: Liquidity refers to the ease with which an asset or security can be quickly bought or sold in the market without causing a significant price change. Cash is the most liquid asset.


Reserve Requirement: Reserve requirement is the percentage of deposits that banks are required to hold in reserve, as set by the central bank. It influences the amount of money that banks can create through lending.


Bank Run: A bank run occurs when a large number of customers withdraw their deposits from a bank due to concerns about the bank's solvency, leading to a crisis for the bank.


 International Economics 



International Trade: The exchange of goods and services across international borders. Countries engage in trade to benefit from comparative advantages, leading to increased efficiency and economic growth.


Comparative Advantage: The ability of a country to produce a good or service at a lower opportunity cost than another country. It forms the basis for specialization and trade between nations.


Protectionism: The use of trade barriers, such as tariffs and quotas, to protect domestic industries from foreign competition. Protectionist policies can restrict international trade but may also lead to trade disputes.


Balance of Trade: The difference between the value of a country's exports and imports of goods. A trade surplus occurs when exports exceed imports, while a trade deficit occurs when imports exceed exports.


Foreign Direct Investment (FDI): Investment made by a company or individual in one country in business interests in another country. FDI plays a significant role in the global economy, promoting economic development and international business integration.


Exchange Rate: The price of one currency expressed in terms of another currency. Exchange rates fluctuate based on supply and demand factors and are crucial for international trade and investment

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Foreign Exchange Market: The global marketplace for buying and selling currencies. It is the largest financial market in the world and determines exchange rates between different currencies.


Trade Surplus and Trade Deficit: A trade surplus occurs when a country exports more goods and services than it imports. A trade deficit occurs when a country imports more goods and services than it exports.


Balance of Payments: A comprehensive record of all economic transactions between residents of a country and the rest of the world during a specific period. It includes the trade balance, foreign aid, investments, and other financial transactions.


World Trade Organization (WTO): An international organization that regulates international trade. It provides a framework for negotiating trade agreements and resolving trade disputes between member countries.


Tariff: A tax imposed on imported goods, making them more expensive and less competitive in the domestic market. Tariffs are a common form of trade barrier.


Free Trade: The policy of allowing goods and services to be traded across borders without imposing tariffs, quotas, or other restrictions. Free trade promotes efficiency, competition, and economic growth.

 Public Economics


Public economics is the study of ow government policy decisions impact the economy. 


Public Goods: Goods that are non-excludable and non-rivalrous, meaning that individuals cannot be excluded from using them, and one person's use does not diminish their availability to others. Public goods include clean air, street lighting, and national defense.


Externalities: The unintended side effects of economic activities on third parties, which can be positive (benefits) or negative (costs). Externalities can lead to market failures and are often used as a rationale for government intervention.


Market Failure: Situations in which the allocation of goods and services by a free market is not efficient, leading to overproduction or underproduction of certain goods. Market failures can occur due to externalities, public goods, imperfect information, and monopoly power.


Government Intervention: The actions taken by the government to correct market failures or achieve specific social and economic goals. Interventions can include regulations, taxes, subsidies, and public provision of goods and services.


Taxation: The process by which governments collect revenue from individuals and businesses to fund public expenditures. Taxes can be progressive (higher income individuals pay a higher percentage of their income) or regressive (higher income individuals pay a lower percentage of their income).


Subsidies: Financial assistance provided by the government to specific industries, sectors, or activities. Subsidies are often used to promote desired outcomes, such as encouraging renewable energy production or supporting agriculture.


Redistribution: The transfer of income and wealth from one group of individuals to another, often through taxation and social welfare programs. Redistribution aims to reduce income inequality and improve the overall well-being of society.


Social Welfare Function: A mathematical representation of society's preferences over different income distributions. It helps in understanding the trade-offs between equity and efficiency when making policy decisions.


Pigovian Taxes: Taxes imposed on activities that generate negative externalities, such as pollution or smoking. Pigovian taxes are designed to internalize the external costs, making the market outcome more efficient.


Public Choice Theory: A branch of economics that applies economic analysis to public sector decision-making. It explores how individuals' self-interest and rational behavior influence government policies and outcomes.


Growth and Development Economics


Growth and development economi focus on the economic procs of growth, development, and the factors that influence economic progress. 


Economic Growth: Economic growth refers to the increase in the production and consumption of goods and services in an economy over a specific period of time. It is often measured by the growth rate of Gross Domestic Product (GDP).


Human Development Index (HDI): HDI is a composite index that measures a country's average achievements in three basic aspects of human development: health (life expectancy at birth), education (mean years of schooling and expected years of schooling), and standard of living (GNI per capita).


Sustainable Development: Sustainable development aims to meet the needs of the present without compromising the ability of future generations to meet their own needs. It involves economic, social, and environmental considerations to ensure long-term well-being.


Capital Accumulation: The process of increasing the stock of physical and human capital in an economy.

 Physical capital includes machinery, infrastructure, and technology, while human capital refers to the skills, knowledge, and health of the workforce.


Total Factor Productivity (TFP): TFP measures the efficiency with which inputs (capital and labor) are used in production. It captures technological progress and improvements in organizational and managerial skills.


Poverty Trap: A situation in which individuals or communities are trapped in poverty due to factors that reinforce and perpetuate their low income, making it difficult to escape poverty without external assistance or intervention.


Inclusive Growth: Inclusive growth focuses on economic growth that benefits all segments of society, especially the marginalized and vulnerable groups. It emphasizes reducing income inequality and improving opportunities for all.


Convergence Theory: Convergence theory suggests that poorer economies tend to grow at faster rates than richer economies, leading to a convergence in per capita income levels over time.


Economic Development: Economic development refers to the sustained improvement in the standard of living, well-being, and economic health of a country's population. It involves economic growth as well as improvements in education, healthcare, infrastructure, and institutions.


Poverty Alleviation: Poverty alleviation refers to efforts and policies aimed at reducing the prevalence and severity of poverty in a society. It includes social welfare programs, education initiatives, and employment opportunities for the poor.


Gender Development Index (GDI): GDI measures gender gaps in human development achievements by considering the disparities between men and women in life expectancy, education, and income

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Foreign Direct Investment (FDI) and Economic Growth: FDI refers to investment made by a firm or individual in one country in business interests in another country. It can stimulate economic growth by bringing in capital, technology, and employment opportunities.


 Environmental and  Demography  


Environment: The surroundings in which organisms live, including the air, water, land, natural resources, plants, and animals. It encompasses both biotic (living) and abiotic (non-living) factors.


Ecology: The scientific study of the interactions between organisms and their environment. It examines the relationships between living organisms and their physical and biological surroundings.


Biodiversity: The variety of life forms, including different species, genetic variations within these species, and ecosystems.

 Biodiversity is important for ecosystem stability and resilience.


Climate Change: Long-term changes in the average weather patterns that have come to define Earth's local, regional, and global climates. Human activities, especially the burning of fossil fuels, contribute significantly to climate change.


Sustainability: The ability to meet the needs of the present without compromising the ability of future generations to meet their own needs. Sustainable practices aim to balance economic, social, and environmental considerations.
Pollution: The introduction of contaminants into the natural environment that cause adverse changes. Pollution can affect air, water, soil, and ecosystems, leading to environmental degradation and health issues.


Natural Resource: Any resource found in nature that is used by humans, such as water, minerals, forests, and fossil fuels. Sustainable management of natural resources is crucial for future generations.


Renewable Energy: Energy derived from natural processes that are continuously replenished, such as sunlight, wind, and geothermal heat. Unlike fossil fuels, renewable energy sources do not deplete over time.


Demographic 


Demography: The statistical study of populations, including the structure, distribution, and trends within a population. Demography analyzes factors such as birth rates, death rates, migration patterns, and age distribution.


Population Growth Rate: The rate at which a population's size increases or decreases in a given period, usually expressed as a percentage. It considers births, deaths, and migration.


Fertility Rate: The average number of children born to women of childbearing age in a specific population. 

Total fertility rate (TFR) is a common measure representing the average number of children a woman would have during her lifetime.


Mortality Rate: The number of deaths in a population, usually expressed per 1,000 individuals per year. Crude death rate refers to the total number of deaths per year for every 1,000 people.


Life Expectancy: The average number of years a person can expect to live, based on current mortality rates. It is often used as an indicator of a population's overall health and well-being.


Migration: The movement of people from one place to another, whether within a country (internal migration) or between countries (international migration). Migration can be voluntary or forced due to various factors.


Dependency Ratio: A demographic measure showing the ratio of dependents (individuals under the age of 15 and over the age of 64) to the working-age population (ages 15-64). It provides insights into the economic burden on the working population.


 Indian Economy:


Gross Domestic Product (GDP): The total monetary value of all goods and services produced within a country's borders in a specific time period. GDP is a key indicator of a nation's economic performance.


Inflation Rate: The rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power. Inflation in India is measured by the Consumer Price Index (CPI) and Wholesale Price Index (WPI).

Fiscal Deficit: The difference between the government's total expenditure and its total revenue (excluding borrowing) in a fiscal year. It indicates the total borrowing requirements from all sources.


Monetary Policy: The management of money supply and interest rates by the Reserve Bank of India (RBI) to control inflation, stabilize the currency, and promote economic growth.


Repo Rate: The interest rate at which the RBI lends money to commercial banks for a short term. Changes in the repo rate affect borrowing and spending in the economy.


Current Account Deficit (CAD): The difference between a country's total imports of goods, services, and transfers and its total exports of goods, services, and transfers. A persistent CAD can put pressure on the country's currency value.


Foreign Direct Investment (FDI): Investment made by a company or individual in one country in business interests in another country. FDI inflows play a significant role in India's economic development.


Goods and Services Tax (GST): A comprehensive indirect tax on the manufacture, sale, and consumption of goods and services throughout India. It replaced various indirect taxes and simplified the taxation system.
Make in India: A government initiative launched to encourage companies to manufacture their products in India. It aims to boost domestic manufacturing and create employment opportunities.


NITI Aayog: The National Institution for Transforming India, a policy think tank of the Government of India. It replaced the Planning Commission and focuses on sustainable and inclusive development.


Demonetization: A government policy where specific currency notes are removed from circulation and replaced with new notes. India experienced demonetization in 2016, impacting cash transactions and the economy.

 
Goods and Services Tax (GST): A unified indirect tax system implemented in India in 2017, replacing multiple state and central taxes. It aims to streamline the taxation process and create a single market for goods and services


I hope the above definition will help you in preparation of Net Economics and other Competitive papers.If u have any query u can whatsapp  at 7737896705 .


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