question archive Why can feedback effects make a general equilibrium analysis substantially different from a partial equilibrium analysis? Feedback effects can make a general equilibrium analysis different from a partial equilibrium analysis because in general equilibrium analysis: a
Why can feedback effects make a general equilibrium analysis substantially different from a partial equilibrium analysis? Feedback effects can make a general equilibrium analysis different from a partial equilibrium analysis because in general equilibrium analysis: a
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Why can feedback effects make a general equilibrium analysis substantially different from a partial equilibrium analysis? Feedback effects can make a general equilibrium analysis different from a partial equilibrium analysis because in general equilibrium analysis:
a. Equilibrium prices and quantities in all markets are determined independently equilibrium prices and quantities in all markets are determined independently,
b. The impact of a market's price or quantity adjustments is overstated in markets for complements,
c. The impact of a market's price or quantity adjustments is understated in markets for substitutes,
d. The well-being of society as a whole in terms of the utilities of individual members is measured,
e. Price and quantity adjustments in one market account for adjustments in related markets price and quantity adjustments in one market account for adjustments in related markets.
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e. Price and quantity adjustments in one market account for adjustments in related markets price and quantity adjustments in one market account for adjustments in related markets.
At the point when we decide the equilibrium level of prices and quantities in a market using partial equilibrium analysis, we expect that action of one market has almost no impact on the related markets but on the other hand general equilibrium analysis takes into account the feedback effect in determining the prices and quantity in all the markets simultaneously i.e price or quantity change in one market can cause a price or quantity alteration in related markets.b
