Micro Unit 2

Market is determined by Law of Supply and Law of Demand. Both the curves can have different Elasticity. For a demand curve, upper part have more Elasticity, while the lower part have less Elasticity. Elasticity of supply and demand curve can Tax Incidencel.

There are other Elasticity other than curve:
Cross-Price Elasticity of Demand (XED)
Income Elasticity of Demand (YED)

Five Determinants of Demand (Shifter of demand)

There can be two types of goods:
Complements:

Complements are two goods that are bought and used together. If the price of one increases, the demand for the other will fall (or vice versa).

Substitute goods are used in place of one another. If the price of one increases, the demand for the other will increase (or vice versa).

Goods can also be classified in Normal Goods and Inferior Goods.

Government can regulate the economy through Price Ceiling and Price Floor. However, usually, this will break the economy from Equilibrium, creating Deadweight Loss (DWL).

Tariff is used in international trade to protect domestic industries from foreign competition.