PARTIV INFORMATION,MARKET FAILURE, AND THE ROLEOF GOVERNMENT CHAPTER 16 GENERAL EQUILIBRIUMAND ECONOMICEFFICIENCY 一、QUESTIONS FOR REVIEW 1.Why can feedback effects make a general equilibrium analysis substantially different from a partial equilibrium analysis? A partial equilibrium analysis focuses on the interaction of supply and demand for one market.It ignores the influences that shifts in supply and demand in one market might have on the markets for complements and substitutes.A general equilibrium analysis takes feedback effects into account,where a price or quantity adjustment in one market can cause a price or quantity adjustment in d markets Ignoring these feedback supply or demand.An initial shift in demand in one market,for exampe, can cause a shift in demand in a related market,which can then cause a second shift in demand in the first market.A partial equilibrium analysis will stop at the first initial shift whereas a generalequilibrium analysis will tinue on and look at possible shifts in demand in relatedm Although analysis should incorporate all feedback effects,one task of the economist is to determine the markets that are most clsely related to the market of primary concern.Attention is directed toward these markets thus enabling better forecasts of changes in equilibrium prices and quantities. 2.In the Edgeworth box diagram explain how one point can simultaneously represent the market baskets owned by two consumers. The Edgeworth box diagram allows us to represent the distribution of two goods between two individuals.The box is formed by inverting the indifference curves of one individual and superimposing these on the indifference curves of another individual.The sides of the box represent axis,we read off the amount to each individual as the difference between the horizontal axis and the point.For one individual,this is the distance from the bottom of the box to the top,and for the other,this is the distancePART IV INFORMATION, MARKET FAILURE, AND THE ROLE OF GOVERNMENT CHAPTER 16 GENERAL EQUILIBRIUM AND ECONOMIC EFFICIENCY 一、QUESTIONS FOR REVIEW 1. Why can feedback effects make a general equilibrium analysis substantially different from a partial equilibrium analysis? A partial equilibrium analysis focuses on the interaction of supply and demand for one market. It ignores the influences that shifts in supply and demand in one market might have on the markets for complements and substitutes. A general equilibrium analysis takes feedback effects into account, where a price or quantity adjustment in one market can cause a price or quantity adjustment in related markets. Ignoring these feedback effects can lead to inaccurate forecasts of the full effect of changes in either supply or demand. An initial shift in demand in one market, for example, can cause a shift in demand in a related market, which can then cause a second shift in demand in the first market. A partial equilibrium analysis will stop at the first initial shift whereas a general equilibrium analysis will continue on and look at possible shifts in demand in related markets. Although analysis should incorporate all feedback effects, one task of the economist is to determine the markets that are most closely related to the market of primary concern. Attention is directed toward these markets, thus enabling better forecasts of changes in equilibrium prices and quantities. 2. In the Edgeworth box diagram, explain how one point can simultaneously represent the market baskets owned by two consumers. The Edgeworth box diagram allows us to represent the distribution of two goods between two individuals. The box is formed by inverting the indifference curves of one individual and superimposing these on the indifference curves of another individual. The sides of the box represent the total amounts of the two goods available to consumers. On the vertical axis, we read off the amount to each individual as the difference between the horizontal axis and the point. For one individual, this is the distance from the bottom of the box to the top, and for the other, this is the distance