Basic Concepts in Economics and Money Flashcards

Vocabulary flashcards covering key terms and definitions from Chapter 1 (Basic Concepts in Economics) and Chapter 2 (Money).

Natural Science

A science whose laws are universally acceptable and whose validity can be tested in a laboratory under controlled conditions, such as Mathematics, Physics, and Chemistry.

Social Science

An abstract or behavioural science related to the study of some aspect of human behaviour whose laws are not universal but statements of general human tendencies.

Oikonomia

The Greek word from which the term 'Economics' originates, meaning 'management of the household'.

Queen of Social Sciences

The phrase used by Paul Samuelson to refer to Economics.

Arthashastra

An ancient Indian political treatise authored by Kautilya (Chanakya) that implies the science of acquiring and managing wealth.

Adam Smith's Definition of Economics

A wealth-oriented definition stating Economics is 'a science of wealth', introduced in his 1776 work 'An Inquiry into the Nature and Causes of Wealth of Nations'.

Prof. Alfred Marshall's Definition of Economics

A welfare-oriented definition published in 1890 in 'Principles of Economics', stating Economics studies mankind in the ordinary business of life and its attainment of material requisites of well-being.

Lionel Robbins' Definition of Economics

A scarcity-oriented definition published in 1932 stating Economics studies human behaviour as a relationship between ends and scarce means which have alternative uses.

Micro Economics

A branch derived from the Greek word 'Mikros', coined by Sir Ragnar Frisch in 1933, that deals with the behaviour of individual variables like a household, worker, firm, or industry.

Macro Economics

A branch derived from the Greek word 'Makros', coined by Sir Ragnar Frisch in 1933, that deals with aggregates covering the entire economy like national income and total employment.

Want

In economics, a feeling of 'lack of satisfaction' which prompts an individual to satisfy it.

Economic Wants

Wants involving monetary transactions where an individual has to pay a price, such as food or medicines.

Non-economic Wants

Wants that can be satisfied without making any monetary payment, such as air or sunshine.

Goods

Anything that satisfies human wants and possesses material existence, such as chalk.

Services

Intangible activities that satisfy human wants without having material existence, such as teaching.

Utility

The capacity of a commodity to satisfy human wants, or its want-satisfying power.

Value-in-use

The worth or usefulness of a commodity, such as sunshine which has immense worth but no price.

Value-in-exchange

The worth of a commodity or service expressed in terms of another commodity or money.

Water-Diamond Paradox

The economic phenomenon where goods like water have a high value-in-use but low exchange value, whereas goods like diamonds have low value-in-use but high exchange value due to scarcity.

Wealth

Anything that has market value, can be exchanged for money, and possesses utility, scarcity, transferability, and externality.

Physical Transferability

The actual physical movement of goods from one person or place to another, such as a vehicle.

Notional Transferability

The transfer of ownership rights of a good when physical transfer is impossible, such as land.

Personal Income

Earnings received by an individual from all sources.

Personal Disposable Income (PDI)

The part of personal income left over after paying direct taxes such as income tax and wealth tax.

Real Income

The purchasing power of money income, represented by the commodities purchased out of money income.

Residual Income

The income left over after making payments to all factors of production, such as profit.

Unearned Income

Income received from sources without indulging in any productive activity, such as lottery prizes or windfall gains.

Land

A natural factor of production encompassing resources on, above, and below the earth's surface that earns 'rent'.

Labour

Any physical or mental effort undergone during production to earn the reward of 'wages'.

Capital

A man-made, produced means for further production that earns the reward of 'interest'.

Entrepreneur

The organizer who coordinates production factors to earn the reward of 'profit'.

National Income

The aggregate monetary value of all final goods and services produced in an economy during a year.

Saving

The part of income set aside to satisfy future needs by foregoing current consumption.

Investment

The creation of capital assets like machinery and equipment through the mobilization of savings.

Trade Cycles

Fluctuations in business representing ups and downs in overall economic activities caused by inflation and depression.

Economic Growth

A narrow, quantitative, unidimensional concept referring to an increase in a country's real national income over a long period.

Economic Development

A broader, qualitative, multi-dimensional concept indicating economic growth along with progressive changes in variables determining human well-being.

Barter System

An economic system based on the direct exchange of goods for goods.

Prof. Crowther's Definition of Money

Money is anything that is generally acceptable as a means of exchange and at the same time acts as a measure and a store of value.

Standard or Full Bodied Coins

Coins whose face value is equal to their intrinsic value, typically made out of precious metals like gold or silver.

Token Coins

Coins whose face value is higher than their intrinsic value, made of cheaper metals like aluminum or nickel.

Credit Money (Bank Money)

Deposits created from cash saved by people, transferable on demand using instruments like cheques and demand drafts.

Electronic Money

Monetary value stored and transferred electronically through mobile phones, tablets, smart cards, or computers, backed by the Central Bank.

Legal Tender Money

Money backed by law that cannot be legally refused by anyone in a transaction.

Non-Legal Tender Money

Money used in final payments without legal compulsion of acceptance, such as cheques or bills of exchange.

Black Money

Tax-evaded income received in cash that is not accounted for and on which tax is not paid to the government.