02 Economics DICTIONARY
1. Inflation
Section titled “1. Inflation”Inflation is the rise in overall prices across an economy, which reduces the purchasing power of money. When inflation goes up, you can buy less with the same amount.
Example: Your usual 50 rupee snack now costs 60.
2. Recession
Section titled “2. Recession”A recession is a period when the economy slows down, jobs reduce, and businesses earn less. Consumers also cut spending.
Example: During a downturn, companies freeze hiring and delay new projects.
3. Supply and Demand
Section titled “3. Supply and Demand”Prices are affected by how much is available and how much people want something. When demand is high and supply is low, prices rise.
Example: Onion prices jump during shortages.
4. Opportunity Cost
Section titled “4. Opportunity Cost”This is the value of what you give up when you choose one option over another. Every decision has an opportunity cost.
Example: Working overtime instead of going to a party means sacrificing leisure.
5. Market Economy
Section titled “5. Market Economy”A market economy lets buyers and sellers decide prices through competition. The government has limited control.
Example: E commerce pricing adjusts based on demand and competition.
6. Fiscal Policy
Section titled “6. Fiscal Policy”It refers to how governments use taxes and spending to influence the economy. Increasing or reducing taxes affects growth.
Example: Government cuts GST to boost consumer spending.
7. Monetary Policy
Section titled “7. Monetary Policy”This is how a central bank manages interest rates and money supply. Lower rates encourage borrowing and investment.
Example: RBI cuts interest rates so loans become cheaper.
8. GDP (Gross Domestic Product)
Section titled “8. GDP (Gross Domestic Product)”GDP is the total value of goods and services produced in a country in a given period. It is used to measure economic health.
Example: News reports say GDP grew by 7 percent this year.
9. Budget Deficit
Section titled “9. Budget Deficit”A deficit happens when a government spends more than it earns through taxes. It must borrow money to cover the difference.
Example: More spending on infrastructure than tax collection.
10. Business Cycle
Section titled “10. Business Cycle”These are the ups and downs in economic activity over time such as growth, peak, recession, and recovery.
Example: Tech hiring increases during boom years and slows during downturns.
11. Productivity
Section titled “11. Productivity”Productivity measures how much value is created per unit of time or effort. Higher productivity means the same people produce more.
Example: A developer builds more features using automation tools.
12. Capital
Section titled “12. Capital”Capital refers to financial resources, tools, or assets used to produce goods or services. It helps businesses grow.
Example: Machines in a factory or funds for a startup.
13. Interest Rate
Section titled “13. Interest Rate”Interest rate is the cost of borrowing money or the return for saving it. Higher interest discourages loans.
Example: Your home loan EMI increases when interest rates rise.
14. Inflation Rate
Section titled “14. Inflation Rate”This is the percentage change in prices over a period. It shows how quickly costs are increasing.
Example: Twenty rupee milk price hike over one year reflects inflation.
15. Market Share
Section titled “15. Market Share”Market share shows how much of an industry or segment a company controls. Higher share means stronger position.
Example: A phone brand captures 30 percent of all smartphone sales.
16. Scarcity
Section titled “16. Scarcity”Scarcity means resources are limited compared to unlimited wants. This creates competition and drives decision making.
Example: Only a few seats left on a flight increases ticket prices.
17. Cash Flow
Section titled “17. Cash Flow”Cash flow tracks how money enters and leaves a business. Strong cash flow is essential for survival.
Example: A business struggles because clients delay payments.
18. Elasticity
Section titled “18. Elasticity”Elasticity shows how sensitive demand is to a change in price. If demand drops sharply after a price increase, it is elastic.
Example: People stop buying a snack when its price doubles.
19. Subsidy
Section titled “19. Subsidy”A subsidy is financial support from the government to lower the cost of goods or services. It helps make things affordable.
Example: Reduced LPG cylinder prices due to government support.
20. Investment
Section titled “20. Investment”Investment is using money today to create more value in the future. It can be in stocks, businesses, or assets.
Example: Buying stocks expecting long term returns.
21. Leverage
Section titled “21. Leverage”Leverage means using borrowed money to increase the potential return from an investment. It increases both risk and reward.
Example: A company takes a loan to expand manufacturing.
22. Marginal Cost
Section titled “22. Marginal Cost”Marginal cost is the extra cost of producing one more unit of something. Businesses use it for pricing decisions.
Example: Making one more pizza costs an extra 40 rupees.
23. Consumer Behavior
Section titled “23. Consumer Behavior”This studies how people make buying decisions. It includes tastes, psychology, budget, and social factors.
Example: A person prefers buying brands their friends use.
24. Competition
Section titled “24. Competition”Competition happens when multiple businesses try to attract the same customers. It leads to better pricing and quality.
Example: Two food delivery apps offer discounts to gain customers.
25. Free Market
Section titled “25. Free Market”A free market operates with minimal regulation where prices are driven by choices of buyers and sellers.
Example: Stock market trading where supply and demand set prices.