Editing General equilibrium theory (section)

{{Short description|Theory of equilibrium between supply and demand}}
{{Economics sidebar}}
In [[economics]], '''general equilibrium theory''' attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an overall [[List of types of equilibrium#Economics|general equilibrium]]. General equilibrium theory contrasts with the theory of [[partial equilibrium|''partial'' equilibrium]], which analyzes a specific part of an economy while its other factors are held constant.<ref>{{cite book|doi=10.1057/978-1-349-95121-5_933-2|chapter=General Equilibrium|title=[[The New Palgrave Dictionary of Economics]]|year=2008|last1=McKenzie|first1=Lionel W.|author-link=Lionel W. McKenzie|pages=1–27|isbn=978-1-349-95121-5}}</ref>

General equilibrium theory both studies economies using the model of equilibrium pricing and seeks to determine in which circumstances the assumptions of general equilibrium will hold. The theory dates to the 1870s, particularly the work of French economist [[Léon Walras]] in his pioneering 1874 work ''Elements of Pure Economics''.<ref>{{cite book|last=Walras|first=Léon|author-link=Léon Walras|orig-year=1877|year=1954|title=Elements of Pure Economics|url=https://archive.org/details/elementsofpureec0000walr|url-access=registration|publisher=Irwin|isbn=978-0-678-06028-5}} Scroll to chapter-preview [https://books.google.com/books?id=QBklPNvBgCcC links.]</ref> The theory reached its modern form with the work of [[Lionel W. McKenzie]] (Walrasian theory), [[Kenneth Arrow]] and [[Gérard Debreu]] (Hicksian theory) in the 1950s.