The effects of policies vary significantly depending on the size of a country in international markets. Two cases are considered regarding the size of the policy-setting country in international markets. The Large versus Small Country Assumption It uses offer curves to depict equilibria and measures welfare with aggregate welfare functions or trade indifference curves. In contrast, a general equilibrium analysis incorporates the interaction of import and export sectors and then considers the effects of policies on multiple sectors in the economy. A partial equilibrium analysis either ignores effects on other industries in the economy or assumes that the sector in question is very, very small and therefore has little if any impact on other sectors of the economy. Producer and consumer surplus is used to measure the welfare effects on participants in the market. Supply and demand curves are used to depict the price effects of policies. analysis, the effects of policy actions are examined only in the markets that are directly affected. Supply and demand curves for the market of interest are typically used in a partial equilibrium analysis. In partial equilibrium An economic analysis in which the effects are examined only in the markets that are directly affected.
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