Give reasons or explain the following statements. 3) Micro Economics analyses partial equilibrium.

Give reasons or explain the following statements.

3) Micro Economics analyses partial equilibrium.

ANSWER:

Microeconomics is based on partial equilibrium analysis. That is, while analysing each of the units/variables the effect of other units is assumed to be constant. In other words, it is based on the assumption of ceteris paribus. To put in simple words, it analyses each of the units is isolation while ignoring the interdependence among them. Such an analysis is known as partial equilibrium analysis.

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