Almonds and walnuts are substitutes. Suppose the world demand for walnuts increases.
General equilibrium analysis predicts a ____ effect on the equilibrium price and a ____ effect on the quantity of almonds than partial equilibrium analysis.

Question

Quizplus · Accepted Answer

In general equilibrium analysis, the interconnectedness of markets is considered. An increase in demand for walnuts will lead to a higher price for walnuts, which will increase the demand for almonds as a substitute, leading to a larger effect on both the price and quantity of almonds compared to partial equilibrium analysis, which considers only one market in isolation.

Almonds and Walnuts Are Substitutes