156 Understanding Economics A2 Level Text Book

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1 Utility 10
1.1 Law of Diminishing Marginal Utility 10
1.2 Law of Equi Marginal Utility 12
1.3 Indifference Analysis 14/td>
1.4 Multiple Choice Questions 17
2 Budget Line 26
2.1 Shifts In Budget Line 27
2.2 Multiple Choice Questions 30
3 Normal, Inferior and Giffen Goods 42
3.1 Real Income and Substitution Effects of a Price Change 42
3.2 Consumer's Equilibrium 43
3.3 Income Consumption Curve (ICC) 44
3.4 Impacts of Changes in Price 45
3.5 Multiple Choice Questions 47
4 Costs of the businesses 54
4.1 Laws of Variable Proportion 54
4.2 Multiple Choice Questions 64
5 Cost Curves in the Long Run 76
5.1 Economies of Scale 76
5.2 Least Cost Combination 77
5.3 Isoquant and Isocost Approach 78
5.4 Minimum Efficient Scale (MES) 81
5.5 Minimum Efficient Scale (MES) And The Size Of Firms 81
5.6 Natural Monopoly 82
5.7 Reasons for the Existence of Small Firms 83
6 Economist’s Versus Accountant’s Definition of Costs 97
6.1 Decisions to Continue or Shutdown Businesses 100
6.2 Multiple Choice Questions 102
7 Market Structures 108
7.1 Perfect Competition 108
7.2 MULTIPLE CHOICE QUESTIONS 116
8 Monopoly 122
8.1 Multiple Choice Questions 127
9 Externalities 136
9.1 Negative Externalities 136
9.2 Positive Externalities 138
9.3 Multiple Choice Questions 140
10 10 Cost Benefit Analysis 152
10.1 Multiple Choice Questions 153
11 Comparison between Perfect Competition and Monopoly 160
11.1 Efficiency: Productive and Allocative Efficiency 162
11.2 Remedies to Monopoly Abuse 163
11.3 MULTIPLE CHOICE QUESTIONS 165
12 Objectives of Firms 186
12.1 Multiple Choice Questions 188
13 Price Discrimination 200
13.1 Multiple Choice Questions 203
14 Monopolistic Competition 206
14.1 Oligopoly 208
14.2 Price rigidness in Oligopoly 209
14.3 Cartels 210
14.4 Non-Collusive Oligopoly: Game Theory 211
14.5 Prisoner's Dilemma 211
14.6 Concentration Ratio (Lorenz Curve & Gini Coefficient) 212
14.7 Growth of Firms 213
14.8 Multiple Choice Questions 215
15 Contestable Market 228
15.1 Multiple Choice Questions 229
16 Factor Market 234
16.1 Marginal Revenue Productivity Theory 234
16.2 Labour Supply Curve 235
16.3 MULTIPLE CHOICE QUESTIONS 237
17 Monopsony 248
17.1 Trade Unions 249
17.2 Wage Differentials 250
17.3 Economic Rent 251
17.4 Multiple Choice Questions 255
18 National Income Accounting 270
18.1 Multiple Choice Questions 274
19 Per Capita Income and Standard of Living 282
19.1 Poverty Trap 283
19.2 Intergenerational Equity 283
19.3 Net Economic Welfare (NEW) 283
19.4 An Introduction of BRICS 283
19.5 Human Poverty Index 284
19.6 Multidimensional Poverty Index (MPI) 284
19.7 Kuznets Curve 284
19.8 Multiple Choice Questions 286
20 Equilibrium National Income 294
20.1 Squaring The Economic Cycle 297
20.2 Equilibrium Income (a Graphical Treatment) 291
20.3 Close Economy without Government 300
20.4 Investment Expenditures 306
20.5 Equilibrium National Income 307
20.6 A Situation of Disequilibrium 309
20.7 Multiple Choice Questions 313
21 Economy with Government 322
21.1 Equilibrium Income in a Close Economy with Government 322
21.2 Equilibrium National Income (Three Sectoral Economy)- Graphical Analysis 324
21.3 Transfer Payment Multiplier 327
21.4 Induced Taxes 328
21.5 Inflationary and Deflationary Gaps 330
21.6 Systems of Taxation 335
21.7 Laffer Curve 337
21.8 Nudge Theory 338
21.9 Means-Tested Benefit 338
21.10 Negative Income Tax 338
21.11 Multiple Choice Questions 339
22 Open Economy 352
22.1 Equilibrium Income in an Open Economy 352
22.2 Multiple Choice Questions 355
23 Principle of Accelerator 362
23.1 Multiple Choice Questions 364
24 Fiscal Policy 368
24.1 Multiple Choice Questions 373
25 Liquidity Preference Theory 378
25.1 Loanable Fund Theory 381
25.2 Multiple Choice Questions 382
26 Quantity Theory of Money 394
26.1 Credit Creation Process 394
26.2 Monetary Policy 396
26.3 Multiple Choice Questions 400
27 Unemployment 410
27.1 Philips Curve 411
27.2 Supply Side Policies And Natural Rate Of Unemployment 413
27.3 MULTIPLE CHOICE QUESTIONS 415
28 Interdependence of Economic Policies 436
28.1 Multiple Choice Questions 439
29 Developing Economies 452
29.1 Multiple Choice Questions 454
Answer ANSWER KEY 461