ABSTRACT

A restriction on the supply of oil will not only cause a rise in the price of oil but also affect the transportation industry through higher fuel prices. This in turn will affect the retail cost of vegetables and may result in an increase in locally grown vegetables. In general, changes in one market will affect demand and supply in other markets. The study of how demand and supply conditions interact in a number of markets and determine the prices of many commodities is called general-equilibrium analysis. In general equilibrium, the economy is viewed as a closed and interrelated system where the interactions of all markets determine the equilibrium market prices and quantities. A disturbance in one market generates ripples that spread through many other markets.