In spite of these drawbacks, however, the general equilibrium represents a bold attempt to view the numerous interdependencies of an economic system. As the methods of computation improve, its practical utility may considerably increase.
In Economics, equilibrium analysis is of two kinds: Partial Equilibrium analysis and General Equilibrium analysis. In the partial equilibrium analysis, we focus our attention on individual economic units i.e. the consumer, the firm, an industry . or a particular sector of an economy. It takes into account a number of variables for intensive study assuming that the economic process is not disturbed by influences external to the part of the economy we are studying. To use Schneider’s words “The surrounding world is regarded as fixed or frozen over the. period for which it is being studied. This type of theory discusses the determination of prices and outputs of particular commodities assuming those of others remaining unchanged. In other words, in partial equilibrium analysis, we isolate a particular type of activity for special investigation in great depth even though we know that there is, in fact, much interdependence between that under.investigation and that held aside.
The partial equilibrium analysis has obvious limitations. It assumes that disturbances in a particular sector of the economy have only localisation effects. In reality it is not so. Inspite ‘of such limitations, the partial economic analysis occupies an important place in price, and resource allocation theory. According to Marshall, it is easily comprehensible and more effective. It provides simpler propositions and simpler analysis. On the other hand, general equilibrium ‘. approach is more complicated than the partial equilibrium approach. But with the advancement of mathematics this approach is becoming- more popular among the economists.