Distinction between Partial & General Equilibrium

Equilibrium means a position of rest or a state of balance or a state of no change. The two types of equilibrium are -Partial equilibrium &
- General equilibrium
Differences
- Partial equilibrium (PE)was popularised by Alfred Marshall while general equilibrium (GE) analysis was popularised by Leon Walras.
- PE is related to a single variable while GE is related to numerous variables or the economy as a whole.
- PE is based on two assumptions i.e., - Ceteris Paribus & - Changes in one sector do not affect others. GE is based on the fact that the various sectors are mutually interdependent. Change in one sector influences the other sectors.
- PE explains price determination of a single good when other things remain constant.
Dx = f (Px), Sx = f(Px) & Dx = Sx at equilibrium. GE explains mutual & simultaneous determination of prices of all goods & factors. All product & factor markets are simultaneously in equilibrium.
- According to Stigler, "A partial equilibrium is one which is based on only a restricted range of data; a standard example is price of a single prodcut where the price of all other prodcuts is being held fixed during the analysis". On the other hand "the theory of GE is the theory of inter relationships among all parts of the economy".