ABSTRACT
This chapter addresses the micro-equilibrium of commodities and labor as well as the macroeconomic equilibrium of the economy. It covers the neoclassical pricing theory: the free market equilibrium, welfare effects of taxes and subsidies, say's law: main principle of free markets and the Keynesian, classical, and Sharia models of macroeconomic equilibrium. Private sector adapts to the cost of resources; it economizes on resources that become dearer, such as crude oil, with energy saving technologies and products. The private sector uses resources according to their true price. The opportunity cost of a subsidy would be the lost output of the non-subsidized industry. The consumers may gain in terms of additional consumption or producers from additional exports of non-taxed industry products. Say's law of markets is a main principle of free markets within and across countries. Under free market assumptions, commodities are exchanged for commodities; the production of commodities creates a market for the produced commodities.
