Why can feedback effects make a general equilibrium analysis substantially diffe

Question

Why can feedback effects make a general equilibrium analysis substantially different from a partial equilibrium analysis? Feedback effects can make a general equilibrium analysis different from a partial equilibrium analysis because in general equilibrium analysis

A. equilibrium prices and quantities in all markets are determined independentlyequilibrium prices and quantities in all markets are determined independently.

B. the impact of a market's price or quantity adjustments is overstated in markets for complementscomplements.

C. the impact of a market's price or quantity adjustments is understated in markets for substitutessubstitutes.

D. the well-being of society as a whole in terms of the utilities of individual members is measured.

E. price and quantity adjustments in one market account for adjustments in related marketsprice and quantity adjustments in one market account for adjustments in related markets.

Explanation / Answer

Feedback effects can make a general equilibrium analysis different from a partial equilibrium analysis because in general equilibrium analysis price and quantity adjustments in one market account for adjustments in related marketsprice and quantity adjustments in one market account for adjustments in related markets.

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