The Meaning of Partial Equilibrium

Partial equilibrium analysis means that the effects of policy actions are examined only in the markets which are directly affected. Supply and demand curves are used to depict the price effects of policies. Producer and consumer surplus is used to measure the welfare effects on participants in the market.

A partial equilibrium analysis either ignores effects in other industries in the economy or assumes that the sector in question is very very small and therefore has little if any impact on other sectors of the economy.

International Trade Theory and Policy - Chapter 90-2: Last Updated on 2/25/97