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partial equilibrium


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The method of analysis dealing with some part of the economy, deliberately ignoring possible implications of changes in this part for what happens in the rest of the economy. In studying the effects of changes in the supply and demand for a particular good on its equilibrium price and quantity a partial equilibrium analysis ignores changes in the rest of the economy, due, for example, to consequent changes in income distribution. Partial equilibrium analysis is most useful when events in the sector studied have only small effects in the rest of the economy.

Subjects: Economics.


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