Economics : 2010 : CBSE : [All India ] : Set III

The budget line represents all bundles of two goods which a consumer can purchase with his entire money income.

Under perfect competition, a firm cannot influence the price of the product.

A monopoly (originated from the Greek language monos, one + polein, to sell) is defined as a persistent market situation where there is only one seller of a product or service.

In other words, a firm that has no competitor in its industry is called a monopoly firm.

Under monopolistic competition there are few sellers and large number of buyers.

Money is defined as anything which is generally acceptable by the people in exchange of goods & services or in repayment of debts.

Inflationary gap refers to the amount by which aggregate demand exceeds aggregate supply at the full employment level of income. It represents a situation of excess demand. It causes a rises in the price level.

Two sources of demand for foreign exchange are:
(a) To purchase goods and services from foreign countries. For example, Indian people and firms demand US Dollars to pay for goods and services they want to import from USA.
(b)  To purchase financial assets, i.e., demanding foreign exchange to invest in bonds and equity shares in a foreign country.

The demand for a good is said to be perfectly inelastic, when quantity demanded does not change with the change in price level.

Two examples of direct tax are: 
(i) Income tax 
(ii) Wealth tax

Equilibrium level of income is that level of income at which aggregate demand equals aggregate supply.