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Partial equilibrium - is the study of the equilibrium position of an individual, a firm, an

industry or a group of industries viewed in isolation. This method considers the changes in one or two
variables keeping all others constant, i.e., ceteris paribus

General Equilibrium- is a branch of theoretical neoclassical economics that is defined as a


state in which all markets and all decision-making units are in simultaneous equilibrium. In other
words, it deals explicitly with the interdependence among households (which are represented by
their portfolio of factors (e.g. capital, labor, land, etc.) and their preferences for final
consumption goods) and firms (which are represented by the outputs they produce and their
technologies, from which we can determine their demand for factors of production) as mediated
by markets. And characterized by two conditions in which the set of prices in all product and
factor markets is such that:
1) All consumers maximize their satisfactions and all producers maximize their profits and
2) All markets are cleared which means that the total amount demanded equals the total
amount supplied at a positive price in both the product and factor markets.
It seeks to explain the behavior of supply, demand and prices in a whole economy with
several or many markets, by seeking to prove that equilibrium prices for goods exist and that all
prices are at equilibrium. (ine-explain niya yung behavior ng supply, demand and prices sa isang
ekonomiya with several/many markets para patunayan na yung supply ng goods matches
demand and that all prices are at equilibrium.

For example:
If two goods are related (complements or substitutes), then their markets are linked.
Changes to demand/supply in one market affect the equilibrium in linked markets. (yung kasing
theory ng gen equi is deal with the problem of whether the independent action ng bawat
decision-maker leads to a position in which equilibrium is reached by all.)
Complimentary goods- the more of good a being bought would result in more of good B
also being bought. Eg car and diesel.
The economy is in general equilibrium when each market is cleared at a positive price,
with each consumer maximizing satisfaction and each firm maximizing profit.

The equilibrium is stable if the demands function cuts


the supply function from above. In this case an excess
demand drives price up, while an excess supply (excess
negative demand) drives the price down.

The equilibrium is unstable if the demand function cuts


the supply function from below. In this case an excess
demand drives the price down, and an excess supply
drives the price up.