ABSTRACT
This chapter examines the partial equilibrium explanation of the behavior of any individual decision-maker based on the explicit use of the standard idea of a partial derivative. All non-natural and non-individualist variables are explained as logical consequences of the behavior of all individuals. Alfred Marshall's method of explanation starts where the price is determined solely by demand and ends at a stage where all prices is determined by the natural givens, and the quantities produced and consumed are determined by the given utility functions of the individuals. For Marshallian analysis, a complete explanation of an individual decision-maker would see the economy in a long-run equilibrium. The paradigm of this analysis is the Edgeworth-Bowley box, which represents the allocation of two goods between two individuals. To keep the methodological issues as clear as possible, the chapter examines a very simple application of partial equilibrium analysis.
