AS. The price system and the microeconomy

Market Equilibrium
Resource Allocation

Possibly the most important model for economic analysis is the demand and supply model.

In this section, we start by analysing the nature of demand, as this is arguably what drives the economy. We then look at the other side of the model and consider the nature of supply. Then we bring the two together by considering the notion of market equilibrium.

We then look in detail at the specific metrics of elasticity, PED, YED, QED and PES (the acronyms are explained in the section on elasticity. Finally, we look at how the economic problem is tackled by resource allocation and the role that price plays in this.

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