ECO101H1 Chapter Notes - Chapter 5: Price Ceiling, Price Floor, Economic Equilibrium
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ECO101H1 Full Course Notes
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Document Summary
No market or industry exists in isolation from the economy"s many other markets. A change in one market will lead to changes in other markets which will, in turn, lead to changes in the first market. (called feedback) Partial-equilibrium analysis: the analysis of a 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. Price controls: government policies that attempt to hold the price of a product at some disequilibrium value. (some higher others lower)
