Important Curves In Indian Economy- Kuznets Curve, Environmental Kuznets Curve, Phillips Curve, Laffer Curve

Various types of curves can be identified in economics to explain the circumstances of the economy. There are curves that define short-term phenomena while there are long-term curves too tend to explain long-term phenomena. Here we have explained various Important Curves in the Indian Economy.

1. Kuznets Curve

Kuznets Curve is applied to illustrate the theory that economic growth originally leads to higher inequality, succeeded later by the decrease of inequality. The concept was first introduced by Simon Kuznets, an American economist.

As economic growth arises from the production of beneficial products, it normally increases the earnings of workers and investors who partake in the first flow of innovation. This inequality, though, leads to being short-lived as laborers and investors who were originally left behind quickly catch up by supporting offers of either identical or more useful products. This increases their earnings.

2. Environmental Kuznets Curve

This environmental Kuznets curve proposes that economic advancement at first prompts a decay in the environment, yet after a specific degree of economic growth, a general public starts to work on its relationship with the environment and levels of environmental degradation lessons. From an extremely shortsighted perspective, it can propose that economic growth is beneficial for the environment.

3. Phillips Curve

The Phillips curve is an economic theory explained by A. W. Phillips. It declares that inflation and unemployment have a firm and inverse relation. The hypothesis declares that economic growth develops inflation, which in turn should drive higher jobs and more limited unemployment. Still, the initial concept has been slightly disproven empirically due to the phenomenon of stagflation in the 1970s, when there were high levels of both inflation and unemployment.

4. Laffer Curve

The Laffer Curve expresses that assuming tax rates are expanded over a specific level, then tax revenues can really fall on the grounds that higher tax rates deter individuals from working. The curve is used to represent Laffer’s debate that seldom lessening tax rates can raise total tax benefits. The Curve was created by economist Arthur Laffer to show the connection between tax rates and the value of tax revenue received by governments.

5. Engel curve

The Engel curve illustrates how the spending on particular goods changes with household earnings. The appearance of an Engel curve is influenced by demographic items like age, gender, educational level, and all additional user traits. In the matter of food, the Engel curve is concave downwards with a positive slope through decreasing slope. The Engel curve also changes for various kinds of goods. With earnings level as the x-axis and expenses as the y-axis, the Engel curves present uphill slopes for normal goods that have a positive income elasticity of demand. Inferior goods,  that have a negative income elasticity, consider negative slopes for their Engel curves. 

6. Beveridge curve

This indicates a graphical illustration that explains the relation between the job vacancy rate (on the vertical axis) and the unemployment rate (on the horizontal axis) in an economy. This curve ordinarily slopes downwards due to times when there is a huge job vacancy in an economy, which is also characterized by comparatively low unemployment as corporations may really be actively looking to appoint new people. By the very logic, a low job opening rate normally agrees with high unemployment as corporations may not be seeming to appoint many people in new positions. It is named after British economist William Beveridge.

7. J Curve

The J Curve is an economic philosophy that states the trade shortfall will originally decrease following currency depreciation. Then, at that point, the reaction to the curve, which is to an improvement in imports as exports persist, is a rebound, making a “J” shape. The J Curve hypothesis can be implemented in separate areas other than trade deficits, including in the medical field, private equity, and politics. 

8. Indifference Curve

An indifference curve presents a combination of two goods that provide a buyer with an equal level of satisfaction and utility, thereby causing consumer indifference. By the curve, the buyer has an equal inclination for the combinations of goods given—i.e. is indifferent to every combination of goods on the curve. The indifference curves are presented convex to the origin, and never two indifference curves can intersect.

9. Kinked Demand Curve

The kinked demand curve was developed in 1939 by Paul M. Sweezy. The model describes the performance of oligopolistic industries. The kinked demand curve representation tries to describe the reason for price rigidity beneath oligopolistic market conditions. This indicates that an oligopolistic market is identified by a specific level of price rigidity or stability, particularly when there is a variation in prices in the downward trend.

For example, if an arrangement under oligopoly decreases the price of goods, the rival organizations would also grasp it and offset the anticipated profit from the price cut.

10. Offer Curve

In economics and especially in global trade, an offer curve gives the quantity of one kind of goods that an operator will export (“offer”) for every quantity of another kind of goods that it imports. It is due to this cause that the offer curve is identified also as the reciprocal demand curve. The offer curve was initially determined by English economists Edgeworth and Marshall to assist define international trade. 

Hope this article helps you to know all about the Important Curves in the Indian Economy. Read the article thoroughly to clearly understand the concept with respect to each curve.


What are the Important Curves in the Indian Economy?

Some of the important curves in the Indian Economy are Laffer Curve, Phillips Curve, Offer Curve, and Kuznets curve.

What do you mean by Philips Curve in the Indian Economy?

This curve explains that inflation and unemployment have a firm and inverse relation. The hypothesis declares that economic growth develops inflation, which in turn should drive higher jobs and more limited unemployment.


Leave a comment

Download 500+ Free Ebooks (Limited Offer)👉👉