The demand–supply model of partial equilibrium has been a key element of the economist’s toolkit since it was popularised in Alfred Marshall’s famous textbook Principles of Economics in 1890. This model provides a powerful mental tool for addressing a wide range of economic questions as well as a framework for the empirical investigation of real-world markets.
In this article we will apply this model to the market for potatoes and show that, in this case, it is relatively easy to obtain estimates of the important parameters of the demand and supply curves. However, as we will see, it is the special nature of the market for agricultural products that allows this and such analysis is nowhere near as easy when it comes to more general cases.
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