© 2009 Pearson Education, Inc. Publishing as Prentice Hall Principles of Economics 9e by Case, Fair and Oster
General Equilibrium and the Efficiency of Perfect Competition
partial equilibrium analysis The process of examining the equilibrium conditions in individual markets and for households and firms separately.
general equilibrium The condition that exists when all markets in an economy are in simultaneous equilibrium.
efficiency The condition in which the economy is producing what people want at least possible cost.
Input and output markets cannot be considered as if they were separate entities or as if they operated independently. Although it is important to understand the decisions of individual firms and households and the functioning of individual markets, we now need to add it all up, look at the operation of the system as a whole.