Managerial and Macroeconomics Complete Study Flashcards

Comprehensive vocabulary flashcards covering the economic system, managerial economics, demand analysis and elasticity, supply, production functions, cost concepts, market structures, macroeconomic aggregates, business cycles, inflation, balance of payments, and government budgets.

Economics

The social science that studies how individuals, businesses, governments, and societies make choices about how to allocate limited resources to satisfy unlimited wants and needs.

Economic Agents

Decision-makers who affect the economy through activities such as buying, selling, and producing; includes households, businesses, workers, and firms.

Economic Process

The framework of four essential economic activities: resource management, the production of goods and services, the distribution of goods and services, and the consumption of goods and services.

Managerial Economics

A branch of economics that applies microeconomic principles and analysis to specific business decisions, linking economic theory with real-world business practice.

Primary Sector

The economic sector focusing on the extraction and harvesting of natural resources, including agriculture, fishing, mining, forestry, and animal husbandry.

Secondary Sector

The economic sector focused on manufacturing, construction, and processing where raw materials from the primary sector are transformed into finished or semi-finished products.

Tertiary Sector

The service sector of the economy involving the provision of intangible services, such as healthcare, education, finance, banking, retail, hospitality, and transportation.

Quaternary Sector

The knowledge-based part of the economy focused on intellectual activities, scientific research and development (R&D), advanced IT services, and management consulting.

Quinary Sector

An extension of the quaternary sector involving high-level decision-making and leadership by "gold-collar" professionals, such as top corporate executives, government officials, and institutional directors.

Demand

The quantity of a good or service that consumers are willing and able to purchase at a particular price and time period; a flow concept requiring both the desire to purchase and purchasing power.

Law of Demand

The microeconomic principle stating that there is an inverse relationship between price and quantity demanded (ceteris paribus): when price rises, quantity demanded decreases, and vice versa.

Joint Demand

A demand condition occurring when two or more complementary goods are required and used together to satisfy a single want (e.g., cars and petrol).

Composite Demand

Demand for a commodity that has multiple distinct uses, such that allocating more of it to one use reduces its availability for others (e.g., water, electricity).

Derived Demand

Demand for an intermediate good, raw material, or factor of production that results directly from the demand for the final good it helps produce (e.g., demand for steel derived from automobiles).

Latent Demand

Hidden demand that exists when consumers strongly desire a product or service but are unable to satisfy it due to a lack of purchasing power, information, or access.

Giffen Goods

A unique category of inferior goods conceptualized by Sir Robert Giffen for which an increase in price leads to an increase in quantity demanded, directly violating the law of demand (e.g., potatoes during the Irish Potato Famine).

Veblen Goods

Prestige goods conceptualized by Thorstein Veblen in his theory of "conspicuous consumption," whose demand increases as price increases because a higher price enhances their perceived status, prestige, and exclusivity.

Price Elasticity of Demand (PED)

The responsiveness of the quantity demanded of a good to a change in its price, calculated as: $\text{PED} = \frac{\%\,\Delta Q}{\%\,\Delta P} = \frac{\Delta Q/Q}{\Delta P/P}$.

Income Elasticity of Demand (YED)

A measure of the sensitivity of quantity demanded to a change in consumer disposable income ($E_Y = \frac{\%\,\Delta Q_d}{\%\,\Delta Y}$); positive ($E_Y > 0$) for normal goods and negative ($E_Y < 0$) for inferior goods.

Cross-Price Elasticity of Demand (XED)

A measure of the responsiveness of quantity demanded of good $X$ to a change in the price of related good $Y$ ($E_C = \frac{\%\,\Delta Q_X}{\%\,\Delta P_Y}$); positive for substitutes and negative for complements.

Supply

The quantity of a good or service that producers are willing and able to bring to the market for sale during a specified time period, holding other conditions constant.

Law of Supply

The economic principle stating that, other things remaining equal (ceteris paribus), quantity supplied is positively related to price: as price increases, quantity supplied increases, and as price falls, quantity supplied falls.

Price Elasticity of Supply (Es)

A measure of the responsiveness of quantity supplied of a commodity to a change in its unit price, defined as: $E_s = \frac{\%\,\Delta Q_s}{\%\,\Delta P} = \left(\frac{\Delta Q}{\Delta P}\right) \times \left(\frac{P}{Q}\right)$.

Production

The creation of utilities; defined by J. R. Hicks as any physical or mental activity directed toward the satisfaction of other people's wants through exchange.

Production Function

The functional mathematical relationship between physical inputs used and the maximum resulting physical output over a given time period: $Q = f(a, b, c, \dots)$.

Marginal Product (MP)

The additional output obtained by employing one extra unit of a variable input while keeping all other inputs fixed: $MP = TP_n - TP_{n-1}$.

Law of Variable Proportions

A short-run production law stating that as successive units of a variable factor are added to fixed factors, the marginal product of the variable factor rises, reaches a maximum, declines, and eventually turns negative.

Law of Returns to Scale

A long-run production law analyzing the behavior of total output when all productive inputs are varied simultaneously in the exact same proportion.

Opportunity Cost

The value of the next best alternative forgone or sacrificed when resources are allocated to a chosen economic activity instead of their best alternative use.

Explicit Costs

Direct, out-of-pocket production expenses paid by a business to external owners of resources, such as contractual wages, rent for premises, and payments for raw materials.

Implicit Costs

The estimated non-cash opportunity costs of utilizing self-owned and self-employed resources (e.g., foregone salary of the entrepreneur, foregone interest on invested personal capital).

Market

In economics, not a specific geographical location, but rather a mechanism through which buyers and sellers interact to exchange goods and services at mutually agreed prices.

Perfect Competition

A hypothetical market structure with a very large number of buyers and sellers, homogeneous products, free entry and exit, perfect mobility of resources, perfect information, and where individual firms are price takers ($P = MR = MC$).

Monopoly

A market structure where a single seller produces a good with no close substitutes, shielded by significant barriers to entry, giving the seller absolute control over supply and pricing ($P > MR = MC$).

Price Discrimination

The practice by a monopoly seller of charging different prices to different buyers, or for different quantities of the same good, based on variations in consumer purchasing power or elasticity.

Monopolistic Competition

A market structure defined by J.S. Bains where many sellers offer differentiated but close substitute products, leading each firm to face a downward-sloping demand curve and compete via selling costs and non-price competition.

Selling Costs

Expenses incurred by a firm to influence consumers and promote the sales of its products beyond basic production costs, such as spending on advertising, promotional gifts, and branding.

Oligopoly

An imperfect market structure dominated by a small number of large firms producing either homogeneous (pure) or differentiated (imperfect) products, characterized by strategic mutual interdependence.

Kinked Demand Curve Model

An oligopoly pricing model developed by Prof. Paul M. Sweezy explaining price stickiness: the demand curve has a kink at the prevailing price because rivals are assumed to ignore price increases ($D_f$ is elastic) but match price decreases ($D_i$ is inelastic).

Duopoly

A specific market condition characterized by exactly two competing firms that share total market output and maintain strategic interdependence in their price and output decisions.

Monopsony

A market condition characterized by a single buyer who exercises exclusive purchasing control over many sellers (e.g., Indian Railways procuring railway tracks).

Oligopsony

A market structure where a very large number of sellers face only a small number of dominant buyers (e.g., many dairy farmers selling raw milk to a few large corporate processors).

Macroeconomics

A term coined by Ragnar Frisch in 1933 (derived from Greek "macros" meaning large), representing the branch of economics that studies total aggregates and the performance of an economy as a whole.

Gross Domestic Product (GDP)

The total monetary value of all final goods and services produced within the domestic boundaries of a nation in a given year, expressed as: $GDP = C + I + G + NX$.

Gross National Product (GNP)

The total market value of all final goods and services generated by the normal residents and citizens of a country, regardless of location, over one accounting year ($GNP = GDP + NFIA$).

Net National Product (NNP) at Market Price

The monetary value of the net yield of final goods and services produced by an economy over a year, calculated as: $NNP = GNP - \text{Depreciation}$.

Personal Income (PI)

The total aggregate income received by households and individuals from all sources prior to the payment of direct personal taxes: $PI = NI + \text{Transfer Payments} - \text{Corporate Income Taxes} - \text{Undistributed Corporate Profits} - \text{Social Security Contributions}$.

Disposable Income (DI)

The net income left in the hands of individuals and households after deducting direct taxes from personal income ($DI = PI - \text{Direct Taxes}$), which can be freely allocated between consumption and saving.

Business Cycle

Economy-wide wave-like fluctuations in production, trade, and general economic activity, alternating through regular phases of expansion (boom), recession, depression, and recovery.

Inflation

A sustained increase in the general price level of goods and services in an economy over time, resulting in a persistent decline in the purchasing power per unit of domestic currency.

Demand-Pull Inflation

A form of inflation that occurs when total aggregate demand for goods and services strongly outpaces aggregate production supply, described as "too many dollars chasing too few goods."

Cost-Push Inflation

Inflation originating on the supply side, caused by substantial increases in the costs of productive inputs (such as wages and raw materials) that force firms to contract aggregate supply and raise prices.

Balance of Trade (BOT)

The difference between the monetary value of a country's exports and imports of merchandise goods; considered favorable when exports exceed imports.

Balance of Payments (BOP)

A systematic accounting record maintained on a double-entry bookkeeping basis of all economic transactions (both visible and invisible) between the residents of a nation and the rest of the world over a specified period.

Revenue Receipts

Government income flows that neither create a future financial liability nor cause a liquidation or reduction of government assets, including tax revenues and non-tax revenues (fines, fees, interest).

Revenue Expenditure

Current operational expenditures incurred for the normal administrative functioning of the government that neither create assets nor reduce liabilities (e.g., salaries, pensions, subsidies, interest payments).

Capital Receipts

Financial receipts by the government that either incur a financial liability (such as domestic or external borrowing) or reduce existing capital assets (such as disinvestment proceeds and loan recoveries).

Capital Expenditure

Long-term governmental expenditures that directly create productive physical assets (such as schools, hospitals, and highways) or eliminate financial liabilities (such as debt repayment).