General equilibrium theory

General equilibrium theory is an economic concept that analyzes how supply and demand interact across multiple markets simultaneously. It suggests that the prices of goods and services are determined not just in isolation, but in relation to each other. This means that changes in one market can ripple through others, affecting overall economic balance. The theory helps economists understand how resources are allocated efficiently in an entire economy, rather than just in one market, leading to a comprehensive view of how different sectors are interconnected.