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Partial equilibrium

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1 Partial equilibrium on Mon Dec 27, 2010 6:40 pm

A partial equilibrium is a type of economic equilibrium, where the clearance on the market of some specific goods is obtained independently from prices and quantities demanded and supplied in other markets. In other words, the prices of all substitutes and complements, as well as income levels of consumers are constant. Here the dynamic process is that prices adjust until supply equals demand. It is a powerfully simple technique that allows one to study equilibrium, efficiency and comparative statics. The stringency of the simplifying assumptions inherrent in this approach, make the model considerably more tractable, however this may produce results which while seemingly precise do not effectively model real world economic phenomena.

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2 Re: Partial equilibrium on Thu Jan 27, 2011 7:59 am

It is a powerfully simple technique that allows one to study equilibrium, efficiency and comparative statics. The stringency of the simplifying assumptions inherrent in this approach, make the model considerably more tractable, however this may produce results which while seemingly precise do not effectively model real world economic phenomena.




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