Economics And Econometrics

  Goods:  In Economics, goods are   defined as any physical object, natural or man-made that commands a price in the market.   Classification of Goods Broadly, goods are classified in two ways: I. Consumption Goods and Capital Goods II. Final Goods and Intermediate Goods II.   Final Goods and Intermediate Goods A. Final Goods:  Goods and Services purchased or own produced for the purpose of consumption and investment are final goods.   By consumption we mean purchases for the satisfaction of human wants of both durable and non-durable goods and services and by investment we mean purchases of durable producer goods and net addition to stock.   The essential characteristic of ‘Final Good’ is that these are acquired for own use and not for re-sale. Final Expenditure refers to the expenditure on goods and services meant for final consumption and investment. Note:  It is important to note that no goods or services is either always intermediate or ...

Goods: In Economics, goods are defined as any physical object, natural or man-made that commands a price in the market.   Classification of Goods Broadly, goods are classified in two ways: I. Consumption Goods and Capital Goods II. Final Goods and Intermediate Goods   I. Consumption Goods and Capital Goods A. Consumption Goods/Consumer Goods: Goods purchased for satisfaction of wants are called consumption goods. Eg: purchase of food, clothes, furniture etc. by families are called consumption goods.    Consumption Goods are further classified into two sub-categories: (i)  Durable (ii) Non-durable goods .   (i) Consumer Durable goods :  Goods which are used time and again over a period of time are called consumer durable goods. Eg: Washing machine, T.V., cars, etc.   (ii) Non-durable Goods: Goods which get exhausted in a single act of consumption are called single use consumer goods or non-durable consumer goods. Eg: ...

  1. Definition and Meaning of Macroeconomics Macroeconomics is defined as the branch of Economics which studies economic issues or economic problems at the level of an economy as whole. In Macroeconomics, attention is focused on problems such as the level of unemployment, poverty, inflation etc. Issues related to national Income, Government Budget, Balance of Payment etc. also come under the scope of Macroeconomics studies.   2. Macroeconomics and Microeconomics: The Difference   SR.No. Macroeconomics Microeconomics 1 Macroeconomics studies problems of scarcity and choice at the level of an economy as a whole. Microeconomics studies problems of scarcity and choice at the level of an individual, a household, a firm or an industry. 2 Macroeconomics studies or uses macroeconomic variables such as aggregate demand and aggregate supply. Microeconomics uses variables s...

Deficient Demand (Deflationary Gap) It refers to a situation when at full employment income level, AD<AS. In other words, when the planned AD is less than AD which is required to achieve full employment equilibrium, it is called deficient demand and it gives rise to deflationary gap. When deficient demand exists, economy’s income, output and employment decline thus pushing the economy into under-employment equilibrium. Impact of Deficient Demand Deficient demand decreases the level of output , National Income and price level in the economy because when AD<AS, there is less demand for inputs than actually available. As a result, prices of inputs start falling. This creates deflationary situation in the economy.   Measures to Correct Deficient Demand Fiscal Policy Measures Following are the measures to correct Deficient Demand/Deflationary Gap: (a) Decrease in Taxation: When the tax rate is decreased, more money will be available in the hands of people to spend. Purchasin...

The potential level of National Income is the full employment. It is the level at which all the resources of an economy are fully and efficiently employed. Every economy wants to achieve full employment. The objective of full employment is achieved when AD=AS at this level of employment. The gap between Ad and As at full level of employment is called Income gap. Various measures can be taken to reduce this gap. Excess Demand (Inflationary Gap) Excess demand refers to a situation when Aggregate demand is in excess of aggregate supply corresponding to full employment in an economy. In other words, demand is said to be ‘excess’ when it is more than what is required for the fuller utilization of resources in the economy. Since AD is not equal to AS in the case of excess demand, the economy is not in equilibrium. Excess demand brings inflation in the economy. Therefore, excess demand is also called “inflationary gap.” Impact of Excess Demand When AD>As at full employment it mea...