1 Basic Economic Problem

Production Possibility Curve

An increase in production efficiency

Economic Growth
Pivotal Shift Outwards

Outward bowed PPC

Linear PPC
Types of shift in a PPC and the rationale behind them

Productive efficiency and PPC

2 Resource Allocation
Circular flow model
3 Demand and Supply
Graphic Illustration of a Demand Curve

Law of diminishing marginal utility

Income and substitution effects for a fall in price of a normal good

Income and substitution effect of an inferior good

Movements along the demand: extension of demand

Movements along the demand: contraction of demand

The demand curve for the normal goods shift to the right

The demand curve for the inferior goods shift to the left
Relationship of Demand with Substitutes

Relationship of Demand with Compliments

Demand curve when consumers donot find the product appealing

Demand curve due to effective marketing campaigns

Effect of Distribution on Income on Demand: Luxury Goods

Effect of Distribution on Income on Demand: Inferior Goods

Role of Price Expectation on Demand: increase in the price of the good

Supply

Effect of Indirect taxes on the Supply Curve

Effect of a subsidy on the Supply Curve

Market equilibrium

Effects of Price Change on Market Equilibrium:

i) Increase in demand
ii) decrease in demand

iii) increase in supply

iv) decrease in supply

Graphical Illustration of a Change in Equilibrium

Increase in consumer income: Quantity supply extends.

Effect of successful advertising on the demand curve and effect of increase in the
cost of production on the supply curve

Market Disequilibrium
4 Elasticity

Elastic demand:

Perfectly elastic demand

Unit Elastic
Inelastic Demand

Perfectly inelastic demand

Elasticity along the linear demand curve

Graphical Representation of Total Revenue (TR)

Revenue and PED

TR and Perfectly Inelastic Demand Curve

TR and Relatively Inelastic Demand Curve

TR and Unitary Elastic Demand Curve

TR and Relatively Elastic Demand Curve

TR and Perfectly Elastic Demand Curve

Perfectly Inelastic Supply

Relatively Inelastic Supply

Unitary Elastic Supply

Relatively Elastic Supply

Perfectly Elastic Supply

Perfectly Inelastic PED and Consumer Surplus

Supply curve shifting to the right: consumer surplus increases

Demand curve shifting to the left: consumer surplus decreases

Tax: consumer surplus decreases

5 Consumer and Producer Surplus

Consumer Surplus
Producer Surplus

Effect of price increase on consumer surplus

Effect of price fall on consumer surplus

Social Welfare

Consumer and Producer Surplus with an increase in the demand

Deadweight loss
Marginal Decision Rule Determined through Demand and Supply Graph
6 Government Microeconomic intervention
Maximum Price

Minimum Price

Consumer and Producer when demand and supply is elastic

Consumer and Producer when demand and supply is elastic

Buffer Stock Scheme

Guaranteed Price Scheme

Indirect Taxes: in case of a good crop

Ad valorem tax

Effect of indirect tax

Share of tax burden: PED less than PES

Share of tax burden: PED greater than PES

Incidence of Taxation: price inelastic

Incidence of Taxation: price elastic

Incidence of Taxation: perfectly elastic

Incidence of Taxation: perfectly inelastic

Subsidy

Merit goods

Demerit good
Progressive tax

Poverty trap

i) Minimum wage
ii) Minimum wage

Specific tax

Incidence of subsidy: inelastic demand

Incidence of subsidy: elastic demand

7 Macroeconomic Equilibrium/ National Income

Circular flow of income

Injections and leakages in a circular flow of income

National income determination: leakages and withdrawals

Graphical Representation of AD Curve and Real GDP

AD curve
Effect of Income effect on AD

Effect of substitution effect on AD

Effect of interest rate on AD

Short run average Supply Curve (SRAS)

SRAS shifting to the right

LRAS Curve
Classical view of LRAS

Shifts and Movements in LRAS

Graphical Mechanism of Macroeconomic Equilibrium

Effects of a Demand Shock on Equilibrium: increase in AD

Effects of a Supply Shock on Equilibrium: decrease in Aggregate Supply

Shift to the right: AD has increased

8 Meaning and Measurement of Economic Growth
i) Economic Growth

ii) Economic Growth

9 Unemployment
Disequilibrium unemployment

Classical Unemployment

Classical unemployment
10 Inflation / Price Stability

LRAS and SRAS

Demand Pull Inflation

Cost Push Inflation

Monetary Inflation

Quantity Theory of Money

Market of Money

11 Macroeconomic Policies/Government Macroeconomic

intervention
Taxation

Progressive, proportional and regressive taxation

Fiscal Policy: expansionary

Fiscal Policy: contractionary

Monetary Policy: Contractionary

Monetary Policy: Expansionary

Supply Side Policy

12 International Trade/ International Economic issues

Comparative Advantage
Absolute Advantage

Volatility in Supply

Volatility in Demand
Tariffs

Quotas

Subsidy
Trading Possibility Curve

Free Trade

13 Exchange Rates
Demand for Currency
Supply of Currency

Exchange Rate

Demand of domestic currency increases

Depreciation of currency through AD/AS analysis

Interest Rates fall in the domestic currency

Fixed Exchange Rate System

Managed Float System

An increase in exports with a floating exchange rate

J Curve Effect