An attempt to make economics easy to understand
Dr. Garima Dhir 
What is a Bond? Bond is a financial instrument used by governments or corporates to raise money. The entity issuing a bond is borrowing money from the purchaser of the bond, with a promise to return the original amount (principal) along with interest. Since borrowing money implies that it is a ‘Debt’, bond markets are … Read more
Substitution Effect Definition Substitution Effect is change in demand for a good as the price of its substitute changes. Say if the price of Commodity A rises, consumers might shift to Commodity B. Substitution effect is seen only in the light of change in relative prices of goods, assuming that the nominal income of the … Read more
Income Effect Definition Income Effect is the change in demand of a good when the consumer’s disposal income changes. Disposable income could change as a result of a change in income or due to a change in the prices of the goods that the consumer uses. For instance, a decline in the price of other … Read more
This is a series of conversation between two Economists, Akhilesh Verma and myself, Garima Dhir as we try to unravel and simplify various concepts of economics. In today’s blog we discuss ‘Why Does Bangladesh Export Garments and Germany Cars?”. In our last blog, we examined why some countries are poor and others rich. We also discussed how India … Read more
Cross Price Elasticity Meaning Cross Price Elasticity refers to the change in demand of one good with change in the price of another. Why measure a change in the demand of one good when the price of another changes? This is because the two goods could be interconnected with each other. The two goods under … Read more
Cyclical Unemployment Definition Cyclical Unemployment is the loss of job associated with business cycles faced by an economy. Business cycles refer to recession (a downturn) or boom (upturn) faces by an economy. When an economy is in recession, unemployment rates will be high. This is because during a recession, the demand for goods is low. … Read more
Tacit Collusion Definition Tacit collusion happens when firms join up in deciding the price of a commodity, such that the firms do not explicitly exchange information. Tacit means unspoken or implied, without being formally stated. Thus, as the name suggests, the competing firms collude with each other, without directly expressing an official collusion. In this … Read more
Capitalism Definition Capitalism is an economic and political system in which means of production are privately owned. Means of production include land, labour and capital. Unlike Socialism, profit making is the driving factor in capitalism. Note that profit making as an ends to production is a fairly new concept, going only 300 years back. Another fundamental pillar of Capitalism … Read more
Socialism Definition Socialism is a system that is based on public or collective ownership of means of production and distribution of goods. Ownership of such means might lie in the hands on a government, elected through democratic means or with a cooperative body. As a result, there is no private ownership. Socialists believe that shared … Read more
Public Goods Definition Public goods, as the name suggests are available to the entire public, within a society. These goods might be available in nature like sunlight or might be provided by the government through collective taxation like defense services. For a commodity to be classified as public good, it must have two characteristics: Non-Excludability … Read more