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Important Terms on Tax and Market Economics

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Economic terms in the Indian Economy are a very important part of the General Awareness section of many government exams like SSC, Banking, Railways, and many others. This section has a huge weightage of marks as many questions are coming from this section. Candidates need to learn and understand these terms so that they can able to understand economic concepts very well.

Important Economic Terms: Tax and Market

1. Balance of Payments (BOP): This statistical statement summarizes all external transactions (receipts and payments) on current and capital accounts that a country is experiencing in a year.  The BOP shows the sum of assets and liabilities over some time, so it should be balanced.

2. Lorenz Curve: A curve representing wealth and income inequality. Plot income/wealth on the X-axis and population percentiles by cumulative wealth/income on the Y-axis.

3. Monopoly: An industry dominated by one entity/firm having no competitors.

4. Marginal Product of Labor: The change in output cost due to the use of additional labor units.

5. Exclusive Perfection: A market structure in which a firm sells a similar product but is not a perfect substitute.

6. Marginal cost: It is the change in total cost to produce additional units.

7. Marginal Revenue: The change in gross revenue due to the sale of additional units of production. 

8. Marginal Product: The change in output due to the use of additional units of input.

9. Marginal Tax Rate: It is an additional tax paid on additional income.

10. Market Economy: An economic system that allocates resources through decentralized decision-making by individuals and firms.

11. Microeconomics: It is the study of the effects of individual behavior and how they affect resource allocation and use.

12. Macroeconomics: It is the study of wider economic behavior, including the study of phenomena such as economic growth, inflation, and unemployment. 

13. Ordinary Goods: Goods whose quantity demanded increases, with an increase in an individual’s real income.

14. Natural Monopoly: A type of monopoly created by the high initial or fixed costs of running a business in a particular industry.

15. Nash Equilibrium: The concept that players have no incentive to change their chosen strategy after considering their opponent’s choice.

16. Oligopoly: A market structure in which a few firms control a majority of the market share.

17. Opportunity Cost: A benefit that must be given up to get something else. 

18. Phillips Curve: A curve that demonstrates the concept of a stable inverse relationship between inflation and unemployment.

19. Production Possibility Curve: A graph representing the alternative combinations of outputs an economy can produce by transferring resources from one service/good to another. 

20. Price elasticity of demand: A measure of the relationship between changes in the price of a commodity and the amount of demand for that commodity.

21. Price elasticity of supply: A measure of the relationship between changes in the price of a commodity and the supply of that commodity.

22. Price cap: The maximum legal price that a seller can charge for goods or services.

23. Floor Price: The legal minimum price at which the product can be sold.

24. Producer Surplus: Measures the difference between the amount a producer is willing to accept for a good and the amount the producer receives.

25. Pigovian Tax: A wealth tax is imposed on companies/individuals participating in certain activities.

26. Private Goods: Goods that an individual must purchase for consumption and that prevent others from consuming them.

27. Public goods: Products are consumed by individuals without restricting the availability of the products to others.

28. Proportional tax: An income tax system in which high-income and low-income taxpayers collect the same tax percentage.

29. Progressive tax: A tax in which higher-income taxpayers outnumber lower-income taxpayers.

30. Profit: It is the difference between the selling price of a product minus the cost price of a product. 

31. Production function: The relationship between the physical inputs or elements of production and the physical outputs of the production process.

32. Price discrimination: The commercial pricing practice of selling the same product to different customers at different prices.

33. Recurrence tax: A tax in which high-income taxpayers pay a lower rate than low-income taxpayers.

34. Scarcity: It is a situation when there is a limited social resource.

35. Substitutes: Consumers of a product/service consider another product to be the same/similar. Another definition is that two goods are substitutes if an increase in the price of one leads to an increase in demand for the other.

36. Surplus: A state in which the quantity supplied is greater than the quantity demanded.

37. Shortage: a situation in which demand is greater than supply.

38. Supply Economics: A branch of economics that argues that economic growth can be produced effectively by lowering barriers to production and investing in capital.

39. Sunk Cost: A cost that has already been incurred/committed and cannot be recovered. 

40. Tariffs: Taxes imposed on imported goods and services.

41. Tax Burden: Distribution of tax burden between buyer and seller.

42. Gross Revenue: The company’s total revenue from sales of a specified amount of services/goods.

43. Total cost: the total economic cost of the inputs that a firm uses in its production.

44. Variable costs: Costs that fluctuate in proportion to production volume.

45. Welfare Economics: It studies how resource allocation affects social welfare.

46. Consumption basket: It is a collection of goods and services consumed by a household called a consumption basket. To estimate people’s consumption behavior, the Bureau of Statistics determines identified 19 item groups in the consumption basket. For example grains, legumes, milk and dairy products, edible oils, vegetables, fuel and light, clothing, etc.

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Last Updated : 26 Sep, 2022
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