Economics : 2011 : CBSE : [Outside Delhi] : Set I

Production function represents technological relationship between physical input and output of a product. In other words, it shows that with a given state of technology and during a particular period of time, how much we can produce with the given inputs. Symbolically, production function can be written as follows:

Q = f (f1, f2, f3.......f4)

       f1, f2, f3 are factors of production.

Four factors of production used in the production process are land, labour, capital and entrepreneur.

Planned economy is the economy in which all economic decisions are taken by the government or central authority. Main objective is to maximise social welfare with optimum allocation of resources.

A monopoly firm is called price maker because it has full control over the price. Goods produced by the monopolist do not have close substitutes.

The budget line represents all the commodities which a consumer can purchase with his entire money income. Let us have two commodities X and Y. Their respective prices are P₁ and P_2. The entire income of the consumer is Rs 100. The budget line will be written as follows:
P₁x + P₂Y = 100

When the supply of a commodity falls due to change in factors other than price, it is called decrease in supply. Under this, leftward shift of supply curve takes place.

Variables whose magnitude is measured at a particular point of time are called stock variables.

It is the loss of value of fixed asset (like building, machinery, tools) due to its normal wear and tear in the process of production. Every enterprise makes annual provision of funds called depreciation provision in relation to the estimated value of depreciation.

 Statutory Liquidity Ratio: All banks are required to hold a minimum proportion of its total deposits in the form of designated liquid assets such as government securities. When RBI wants to contract credit or lending by banks, it raises SLR & reduces credit availability. Similarly, when RBI wants to expand credit, it reduces SLR.

Money can be defined as anything that is generally acceptable as means of exchange and acts as a measure and store of value.

The currency which is used for making international payments or transactions is called foreign exchange.