Partial equilibrium analysis: Difference between revisions
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'''Partial equilibrium analysis''' is the analysis of the interaction between buyers and sellers in the market for a particular [[good]], the equilibrium price (the [[market price]]), and whether and how quickly the price converges to this market price, ''[[ceteris paribus]]'' all other things in the economy (in particular, the prices and quantities demanded and supplied of other commodities, the incomes and wealth of the buyers and sellers, etc.). | '''Partial equilibrium analysis''' is the analysis of the interaction between buyers and sellers in the market for a particular [[good]], the equilibrium price (the [[market price]]), and whether and how quickly the price converges to this market price, ''[[ceteris paribus]]'' all other things in the economy (in particular, the prices and quantities demanded and supplied of other commodities, the incomes and wealth of the buyers and sellers, etc.). | ||
Most of the standard and elementary analyses in [[microeconomics]], including the [[law of demand]], [[law of supply]], and [[convergence towards market price]], are performed using partial equilibrium analysis. | |||
This is in contrast to [[general equilibrium analysis]], which studies (in a simplistic model of [[perfect information]], zero [[transaction cost]]s, and [[rational behavior]]) the simultaneous interaction of prices and quantity demanded/supplied of a range of goods in the market. | This is in contrast to [[general equilibrium analysis]], which studies (in a simplistic model of [[perfect information]], zero [[transaction cost]]s, and [[rational behavior]]) the simultaneous interaction of prices and quantity demanded/supplied of a range of goods in the market. | ||
Latest revision as of 07:39, 30 August 2011
Definition
Partial equilibrium analysis is the analysis of the interaction between buyers and sellers in the market for a particular good, the equilibrium price (the market price), and whether and how quickly the price converges to this market price, ceteris paribus all other things in the economy (in particular, the prices and quantities demanded and supplied of other commodities, the incomes and wealth of the buyers and sellers, etc.).
Most of the standard and elementary analyses in microeconomics, including the law of demand, law of supply, and convergence towards market price, are performed using partial equilibrium analysis.
This is in contrast to general equilibrium analysis, which studies (in a simplistic model of perfect information, zero transaction costs, and rational behavior) the simultaneous interaction of prices and quantity demanded/supplied of a range of goods in the market.