ECONOMIC NOTES

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ECONOMIC NOTES Pointers Agriculture & Monsoon Economy heavily dependent on agriculture and the livelihood of farmers largely depends on rains. Good conditions for agriculture results in the good harvest which boost rural incomes and boosts spending on consumer goods Government budget & deficit Government revenue - TAX Government expenditure - DEVELOPMENT ACTIVITIES Corporate tax is levied on corporate earnings. Cutting corporate tax Short term - may reduce government revenues thereby increasing fiscal deficit Long term - attracts more FDI, develops more business and overall has a positive impact on GDP Oil China, United States and India - Largest importers of oil Higher oil prices --- worsen current account & fiscal deficit, causes the currency to depreciate, increase in inflation, hike in interest rates which leads to lower consumption and investments -- lower GDP Infrastructure Faster economic growth & lower poverty rate Boost industrial production & improves the growth of the economy Boost agriculture output Long term benefits However Opportunity cost Fiscal deficit worsens Huge investment --- borrowing -- national debt increases Demographic Factors --- Age, Literacy, Occupation, Income, Gender, etc---
CHAPTER 1 BASIC ECONOMIC PROBLEM - scarcity Finite resources, infinite wants FOUR FACTORS OF PRODUCTION & THEIR PAYMENTS Land - Rent Capital - Interest Entrepreneur - Profit Labour - Wages UTILITY CONCEPT - degree of pleasure or satisfaction that an individual receives from an economic act OPPORTUNITY COST - the cost of the next best alternative given up ( when making a choice ) PPC
Assumptions Only two goods produced All resources should be utilised Movement along PPC -> opportunity cost incurred LONG TERM / SHORT TERM Capital goods are used to make consumer goods If a country produces more capital goods, it will probably be able to produce more consumer goods in the future However there will be, fewer consumer goods today and have less in short term ECONOMIC GROWTH - increase in the level of output of the nation CAUSES OF ECONOMIC GROWTH EDUCATION & TRAINING Labour -> Human capital -> labour skilled -> ↑ productivity -> ↑ output HOWEVER, -> balance between education and vocational training NEW TECHNOLOGY e.g internet Faster & more reliable More produced in shorter time -> efficiency ↑ -> more output - ↑ EG NEW RESOURCES e.g fracking Enable the economy to produce more -> greater output IMPROVED EFFICIENCY Allows more output w/ usage of fewer resources in production OIL -> RAW MATERIAL -> NECESSITY -> VEHICLES like car and airplane -> goods transported easily -> MACHINERY -> more efficient KEY TERMS TO USE - MUST USE IN ANY ANSWER EFFICIENCY, OUTPUT, PRODUCTIVITY, ECONOMIC GROWTH, SCARCE, OPPORTUNITY COST, UNLIMITED WANTS, NATION'S RESOURCES, ADEQUATE CETERIS PARIBUS -- can always be challenged in however This commonly-used phrase stands for 'all other things being unchanged or constant'. It is used in economics to rule out the possibility of 'other' factors changing, i.e. the specific causal relation between two variables is focused .
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