Learning Objectives To discuss how the price elasticities of demand and supply measure the load of taxation on buyers/consumers and sellers When the government imposes a tax, buyers, as well as sellers of the product, bear the burden of taxation. But without knowing the degree of elasticity we cannot say who bears how much load
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This part deals with some applications and extensions of basic demand and supply analysis. Such applications focus on the effect of various types of government interventions or policies on market equilibrium. Here we will discuss the Effect of government policies/intervention in market equilibrium. The tax, subsidies, and price control, etc. are the major governmental policies
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Market equilibrium implies a certain type of stability in both the price and quantity of goods. But changing market forces may disturb the equilibrium, either by shifting demand, shifting supply, or shifting both demand and supply. Over time the equilibrium point changes its position. Any factors that cause a change in demand shifts the demand
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Introduction The demand and supply curve let know us about different quantities of goods that are demanded by the consumers at various prices, and quantities that producers are willing to produce and sell at various prices respectively. But studying and knowing demand and supply will not tell us the actual price of goods in the
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Introduction to Incremental Analysis Incremental analysis in economics is also one of the tools used in rational decision-making like marginal analysis and is used in different economic concepts like profit, cost, revenue, utility, etc. Increment simply refers to a change in total. Marginal analysis sometimes may not be applied in real-life especially when it is
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Introduction of Marginal Analysis The term marginal can be defined as a change in total quantity due to one unit change in its determinant. Thus, marginal analysis is a microeconomic concept that deals with a small change in given economic variables or changes in the economic variables due to unit changes in their determinants. Marginal
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Microeconomics does study about economic behavior of individual units and individual economic variables. It provides a theoretical framework for a systematic analysis of the economic behavior of the individual economic units like individual households, firms, industries, and factor owners. For instance, the determination of the price of the product, determining the payment for the factors
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A supply curve is a diagrammatic presentation of the law of supply. It delivers the same information as a supply schedule does. The supply curve is a geometric expression of the schedule showing a positive relationship between the price of the commodity and its supply. The supply curve is derived based on the same assumptions
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A supply schedule is a tabular representation of various combinations of the price of the product and quantity supply that the sellers are willing to produce and offer for sale in the market during a given time. Therefore, the supply schedule also expresses the relationship between the price of the product and the quantity supply
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The law of supply or supply hypothesis gives us the relationship between price and quantity supply of the commodity. It states that other things remaining the same, the quantity of any commodity that a firm will produce and offer for sale rises with a rise in its price and falls with a fall in its