What is Consumer Preference? Consumer preference is the subjective taste of individual consumers that is measured by the satisfaction they derive from an item after they buy it. It is often expressed through utility. The value of the items consumers buy can be compared by measuring the utility of the items. Consumer preference is an important topic in economics. The use of consumer preference is applicable in other schools of thought too. For example, marketing departments keep an eye on consumer preference to check which product has higher demand in the market. They can also use it to check ... Read More

What is Consumer Budget? The real purchasing power of a consumer with which he can buy a combination of two goods is known as the consumer budget. To prepare or learn about the consumer budget, the prices of the two commodities must be available. The consumer budget shows the various combination of commodities a consumer can purchase with his limited income. Every consumer usually has a fixed limit of purchasing power with which he can buy two commodities. The prices are taken to be fixed in the market. In other words, the price of the commodities does not fluctuate ... Read More

What is an Open Economy? Based on the free movement of labor and trade, economies are classified into open and closed economies. It is notable that in the contemporary scenario, all countries of the world engage in trade because no one can produce enough of all necessary commodities that are required in an economy. Based on the mode and process of international trade transactions, economies are classified as open and closed. Images Coming soon Image 1: An open economy A society is deemed to have an open economy considering the following factors − Output market − An economy that ... Read More

What is Government Budget? The government budget is a forecast or annual financial statement of expenditures or revenues that the government tends to have in the coming fiscal year. The fiscal year may or may not be the same as a general calendar year. The government usually presents the budget at the onset of each fiscal year. It is prepared and presented in the parliament by the finance minister and approved by the president before permitting the revenues and expenditures mentioned in it. The government budget is divided mainly into two parts, namely − The Capital Budget The ... Read More

A Government plays a significant role in an economic system. As economies cannot provide all the goods and services that the members of it desire, the governments must intervene in the system to make scarce things available in the economy. The basic questions of economies, such as for what, how and whom should the goods be produced, and how much of these products must be produced remain central to all economies. The economies cannot decide all such motives on their own and the governments exist to provide a balance among various factors of production. That is why the functions of ... Read More

Determining income is an indispensable part of our lives because it helps us manage our lifestyles. In macroeconomics, income determination helps countries or economies to restrict their expenditures within limits. If income is high, it means that the economy is growing while in the case where income is going down, it means that the economy is contracting. Income is, therefore, a part of macroeconomics that has two sides − the demand side and the total national output. There are various theoretical models in macroeconomics that deal with these principles. There are models in macroeconomics that consider the ... Read More

National income refers to the value of goods and services that are produced by a country in a year. In simpler words, national income is the result of all economic activities of a country that is measured in terms of money within a year’s term. The term national income is largely uncertain and is sometimes used interchangeably with the national dividend, national expenditure, and national output. Therefore, national income is the net money value of all goods and services produced within the borders of a nation in a term of one year. National income contains various payments made ... Read More

Introduction: Circular Flow of Income Money and other economic resources move in cycles in an economy from one sector to another. For example, money flows as wages from producers to workers. This money flows back to producers as payment for used products. In fact, when workers buy goods and services in the economy, they pay back the money to producers. In this way, in the simplest form of circular flow (two factors) circular flow, money and resources move between the producers and workers infinitely. Although the two factors model is best to understand the circular flow of income, in ... Read More

Introduction As each consumer has a limited budget, they are faced with the problem of utilising it in the ‘best’ way. With the various goods and products available on the market, this means spending their limited resources in a manner such that the consumer can avail the most benefit or happiness. Thus, the Theory of Consumer Behaviour studies the preferences of consumers and how they utilize their budget to obtain the most happiness according to these preferences. This theory can be divided into Utility, Budget, and Demand, with each having its effect on the overall outcome. in this tutorial, we’ll ... Read More

Introduction When an economy makes a transaction with another country, it gives rise to the need to record those transactions to understand whether an economy is in profit or not. One is the Balance of Payments and the other is Balance of trade. Let us dive deep into the concept of these accounts to understand the difference between them. Balance of Trade As the name suggests, Balance of Trade represents the record of imports and export from one country to another. As we know, if the export of a country is higher than the import it is in trade surplus, ... Read More