ECON 208 Chapter Notes - Chapter 5: Demand Curve, Black Market, Price Floor

• School: McGill University
• Department: Economics (Arts)
• Course: ECON 208
• Professor: Mayssun El- Attar Vilalta

Document Summary

No market or industry exists in isolation from the economy"s many other markets. Partial-equilibrium analysis: the analysis of single market in isolation, ignoring any feedbacks that may come from induced changes in other markets. If a specific market is quite small relative to the entire economy, changes in the market will have relatively small effects on other markets. The feedback effects on the original market will, in turn, be even smaller. In such cases, partial-equilibrium analysis can successfully be used to analyze the original market. General-equilibrium analysis: the analysis of all the economy"s markets simultaneously, recognizing the interactions among the various markets. General-equilibrium analysis is the study of how all markets function together, taking into account the various relationships and feedback effects among individual markets. At any disequilibrium price, quantity exchanged is determined by the lesser of quantity demanded or quantity supplied. Binding price floors lead to excess supply.