If a specific market is quite small relative to the entire economy
A) government intervention is necessary to link it to other markets.
B) partial- equilibrium analysis is the only tool available to understand this market.
C) general- equilibrium analysis will be necessary in order to understand this market.
D) the feedback effects on this market from induced changes in other markets will be very small.
E) changes in this market will have considerable effects on other markets.

Question

Quizplus · Accepted Answer

If a specific market is small relative to the entire economy, then the feedback effects on this market from induced changes in other markets will be very small. This means that changes in this market will not have considerable effects on other markets. Therefore, general-equilibrium analysis will not be necessary to understand this market, and government intervention is not necessary to link it to other markets. Partial-equilibrium analysis may still be useful to understand this market in isolation.

If a Specific Market Is Quite Small Relative to the Entire