Indian Economy Questions

Only if either demand or supply was either completely elastic or inelastic will the tax burden fall entirely on either the buyer or the seller. Between these 2 extremes, tax incidence varies continuously from a perfectly inelastic supply or perfectly elastic demand, where the sellers assumes the entire burden of the tax to the perfectly elastic supply or perfectly inelastic demand where the buyers bear the entire burden. To better see how the elasticity of supply and demand affects tax incidence, consider a 20% tax on a can of soda. Suppose the government decides that the buyer should pay the 20% tax. Does this mean that the buyers will be paying 20% more, or will sellers have to share some of the tax burden? Since higher prices decrease demand, regardless of the reason for the higher prices, sellers will share some of the burden. How much of the burden will be determined by the elasticity of supply and demand for the product?

A bank run occurs when a large number of people withdraw their money from a bank, because they believe the bank may cease to function soon.

A banking panic or bank panic is a financial crisis that occurs when many banks suffer runs at the same time, as people suddenly try to convert their threatened deposits into cash or try to get out of their domestic banking system altogether.

Creditors and debtors:

During inflation creditors lose because they receive in effect less in goods and services than if they had received the repayments during a period of low prices. Debtors, on other hand, as a group gain during inflation, since they repay their debts in currency that has lost its value.The aggregate volume of internal trade tends to increase during inflation due to higher incomes, greater production and larger spending. But the export trade is likely to suffer on account of arise in the prices of domestic goods.

The same currency unit will now buy less goods and services.But the bondholders lose as they get a fixed interest the real value of which has already fallen.

J.M Keynes’ theory of employment is a demand-deficient theory. This means that Keynes visualised employment from the demand side of the model. His theory is a demand-oriented approach, as opposed to the classical supply side model.

According to him,the volume of employment in a country depends on the level of effective demand of people for goods and services. Thus, unemployment is attributed to the deficiency of effective demand.

Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes.

In other words, large sellers selling the products that are similar, but not identical and compete with each other on other factors besides price.

According to the Survey, inflation in the country continued to moderate during 2017-18 with the CPI based headline inflation averaging 3.3 per cent during the period --the lowest in the last six financial years

Retail inflation fell to a record low of 2.18% in May as prices of kitchen staples like vegetables and pulses declined sharply although there was a marginal spike in fruit rates.