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Thread: What is meant by Partial Equilibrium Analysis?

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    Default What is meant by Partial Equilibrium Analysis?

    What is Equilibrium Analysis?

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    Partial Equilbirium Analysis Explanation
    Equilbirium analysis focuses on only one market and assumes that the value of all external variables does not change. Exogenous variables are themselves variables that are not described in the model. Partial equilibrium analysis therefore ignores the potential interaction between markets and separates the market from other sectors of the economy. By its nature, this analysis differs from the general equilibrium analysis, which observes the market as a whole and involves interactions with other markets in the economy.
    Therefore, it is limited to a partially balanced analysis range and focuses only on specific factors in one market. As an example of the analysis of road impact on rice prices, only rice demand and rice prices are analyzed. We ignore other factors like income and unemployment. When analyzing the whole market, this analysis is called general equilibrium analysis.


    Perception of partial equilibrium analysis

    There are several main approaches for partial equilibrium analysis, namely:

    1.The price of the product is fixed or constant
    2.Consumption habits, tastes and income are considered stable.
    3.The price of replaced items or other related items remains constant.
    4.The factors of production used in industry are called price and stability.
    5.The price and quantity of the product produced are fixed and its value is known.

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    6.There is a dynamic of the factors of production.

    Advantages and disadvantages of Partial Equilbirium analysis. Advantages and disadvantages of Partial Equilbirium analysis
    Equilbirium Analysis:
    1.This is a simple method of analysis because it does not take into account many factors.
    2.The analysis is easy to implement. A simple analysis of model implementation allows you to see immediate results.
    3.Small data is required. Due to the analysis of a small number of factors or variables, the amount of data required to perform this partially balanced analysis is small.

    Disadvantages Of Partial Equilbirium Analysis:

    1.Ignore other variables that could have a significant impact on the market. This is most likely because very few variables are considered.
    2.Applies only in certain or limited cases. This is due to the negligence of other sectors of the economy.
    3.Partial equilibrium analysis only discusses the equilibrium of one market, but does not see the impact of other markets on that market.

    Though trading on financial markets involves high risk, it can still generate extra income in case you apply the right approach. By choosing a reliable broker such as InstaForex you get access to the international financial markets and open your way towards financial independence. You can sign up here.


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    What is meant by Partial Equilibrium Analysis?

    Partial equilibrium analysis is an analytical method that focuses on the equilibrium price of a product (price equilibrium) and ignores many other factors that can influence the formation of equilibrium. However, to better understand the analysis of partial equilibrium, it is important to know a few theories:

    Name: images (3).jpeg Views: 17 Size: 31.5 KB
    • When the quantity required exceeds the quantity supplied, the price increases.
    • If the quantity is less than the quantity supplied, the price will be reduced.

    Theories derived from these principles:

    When the price of a product or service drops, consumers consume more and producers reduce their production. Finally, the quantity demanded and the quantity supplied (production) are the same throughout the day, and the prices are balanced.

    When the price of a product or service goes up, consumers spend less and producers produce more. Finally, the quantity demanded and the quantity supplied (production) are the same throughout the day, and the prices are balanced.

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    Example of partial equilibrium analysis:

    During the rice harvest season, rice prices are lowered due to excess supply (rice production). During the dry season, the rainy season when there is no rain, and the rainy season when flooding occurs everywhere, the price of rice increases due to the supply (rice production).

    The example above is very simple and easy to understand, it is also done in other versions such as:

    The general demand for rice has always been the same.

    Do not travel or export abroad. Imagine that it is very difficult to estimate the prices of rice when the general demand for rice is dynamically changing. If, for example, too much rice is exported, it will actually alter the low price of domestic rice due to (rice production). If there is no obstacle to domestic rice production (rope production), there is no need to increase rice prices because the government imports rice.

    Micro-equilibrium analysis vs big data analysis:

    Analytical methods have also evolved over time. Today, many people know how to analyze as many data as possible in order to get the most out of the data. Therefore, it is not surprising that in the future the public will learn more about the method of partial equilibrium analysis, which is analyzed with the latest data, as each part achieves the best results on the complete database.


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    Partial Equilibrium Analysis - Definition
    Partial Equilibrium Analysis is a market analysis method that focuses on a specific trading instrument and does not have a chain relationship and impact between other trading instruments. In short, business people and market analysts can find out about market developments in detail through one market that consists of certain trading instruments without disrupting the process in other types of markets.

    The purpose of this Partial Equilibrium Analysis method is to make it easier for analysts or accountants in a company to carry out comprehensive financial calculations for each product or trading instrument produced so that the process can be completed faster before proceeding to the next stage. In other words, with a more focused calculation, it is hoped that economic activity on one type of market will not interfere with calculations and economic activity in other types of markets, even though they are still in the same field and company.


    Partial Equilibrium Analysis - Advantages & Disadvantages
    There are several advantages and disadvantages that can be obtained through the Partial Equilibrium Analysis method. Here's the explanation:
    1. Advantages
      - More efficient use of resources.
      - The time used can be shortened.
      - More focus on one trading instrument.
      - Does not interfere with other types of markets in any way.

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      - There is no need to compare one type of market with another.

    2. Disadvantages
      - Too focused on one type of market and product without developing other types of markets and products.
      - Can provide an over-confident effect because it does not pay attention and take into account the development of competitors.

    Partial Equilibrium Analysis - Examples
    There is an example that can be explained regarding Partial Equilibrium Analysis to determine the economic balance that occurs in one type of market and trading instrument. Here's the explanation:

    In a PC hardware company, a CEO distributes tasks to each of his employees to focus their work on a special station where each task and designated employee must do work according to operational standards without disturbing the work of other employees.

    For this reason, the CEO assigns financial calculations to his accountants for specific types and products in a partial and balanced manner according to the Partial Equilibrium Analysis method to facilitate the calculation of all kinds of costs such as company operating costs, initial capital, employee salaries in each place, and probability. profit from the sale of each product. All things related to the calculation of Partial Equilibrium Analysis are still within the scope of one market which only involves products in one company without disturbing or thinking about other companies in the same field.

    Though trading on financial markets involves high risk, it can still generate extra income in case you apply the right approach. By choosing a reliable broker such as InstaForex you get access to the international financial markets and open your way towards financial independence. You can sign up here.


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    Definition of Partial Equilibrium Analysis

    Partial Equilibrium Analysis or Partial Equilibrium Analysis is an analysis that only focuses on one market and is usually used to discuss the formation of prices and quantities of goods and services. Partial analysis is usually used in the field of microeconomics. In addition, this analysis will isolate other economic sectors and will ignore the potential that exists in other markets. In this model of racial balance, one can only consider one good and assume that the price of every other good will not change
    Equilibrium is called general when an interconnected price system ensures equality of supply and demand simultaneously in all markets (both commodity and factor).
    In accordance with the definition of equilibrium, this means that in the current price system, all market economic entities (both producers and consumers) with certain techniques and prevailing income distribution are not interested in changing purchases.

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    Advantages and Uses of Partial Equilibrium Analysis
    The only advantage of partial equilibrium analysis is its simplicity. This analysis can make us understand the phenomenon of changes in an item caused by a factor. This is useful in studying economic theory and makes it easier for us to understand the factors that affect the price equilibrium point. Moreover, economics is closely related to assumptions, where assumptions are really needed to simplify the explanation of concepts and theories.

    Disadvantages of Partial Equilibrium Analysis
    The obvious drawback is that there can be more than one factor affecting the supply and demand. What I understand the most is that a partial equilibrium analysis will not cause price anomalies because exogenous factors other than the main factor are not taken into account
    Meanwhile, the disadvantage is that because the model is quite simple it is possible that the partial market equilibrium model may not take into account the important interaction factors that occur in the market where such feedback effects occur. Because here it only stops factors related to the most important sectors. So that the results will also be known that we will apply in some limited market conditions

    Though trading on financial markets involves high risk, it can still generate extra income in case you apply the right approach. By choosing a reliable broker such as InstaForex you get access to the international financial markets and open your way towards financial independence. You can sign up here.


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