Partial Equilibrium Approach 
In the partial equilibrium approach to pricing, we explain price determination of a single commodity,
keeping the prices of other commodities.  We assume that the prices 01 various commodities are independent of one another and do not mutually affect one another. Marshall explains this approach thus, forces to be dealt with are however, so numerous that it is best to analyse a few at a time and work out a number of partial solutions as auxiliaries to our main study. Thus, we begin by isolating the primary relations of supply, demand and price in regard to a particular commodity. We reduce to inaction all other forces by the phrase ‘other things being equal.’ We do not suppose that they are inert, but for the lime we ignore their activity.”

Partial Equilibrium Approach

Partial Equilibrium Approach

Thus, in the Marshallian or partial equilibrium approach to pricing under pcrfectcompctitioll, emand for a commodity is determined on tile assumption that prices of other commodities, tastes and incomes of the consumer remain constant. Similarly, supply is determined on tile assumption that the prices of oilier commodities, price of resources or factors and production functions remain the same. The partial equilibrium analysis discusses only the price determination of a commodity in isolation and does not explain how tile prices of the various communities are inter-dependent and inter-related. Thus, tile partial equilibrium analysis is .b,asc4:01l the assumption that the changes in any single stor of the economy do not significantly affect the other sectors. As Prof. Lipsey observes, “All .part flr librium analyses are based on tile assumption of cells paribus. Strictly interpreted, the assumption is,that’ all other things in the economy-are unaffected b1 any changes in the sector under consideration (say sector A). This assumption is always violated to some extent, fur anything that happens in one sector must cause changes in some other sectors. What matters is that changes induced throughout the rest of the economy sufficiently small and diffused so that the effect In turn have on the sector A can be safely