THE WELFARE SIGNIFICANCE AND NONSIGNIFICANCE OF GENERAL EQUILIBRIUM DEMAND AND SUPPLY CURVES

General equilibrium demand and supply curves can be used to measure the multiple market effects of interventions in a single market. However, complications arise when feedback into the intervened-in market comes through both demand and supply channels. This article presents a new and straightforward proof of the significance of general equilibrium curves when there is only one source of feedback establishes the conditions under which multiple sources of feedback invalidate the analysis, and demonstrates that the general equilibrium curves become policy dependent when there are multiple sources of feedback.