Price changes
How shifts change price
| Change | Price | Quantity |
|---|---|---|
| demand rises | up | up |
| demand falls | down | down |
| supply rises | down | up |
| supply falls | up | down |
Practice
If demand rises (shifts right), the equilibrium:
More demand pushes both the price and the quantity traded up.
Disequilibrium
- price below equilibrium → excess demand (a shortage); buyers compete → price pushed up.
- price above equilibrium → excess supply (a surplus); sellers cut the price → pushed down.
- Either way the market returns to equilibrium.
Practice
If the price is set below equilibrium, there is:
A too-low price means buyers want more than is supplied — a shortage; competition pushes the price up.
Practice
A price above equilibrium causes excess supply (a surplus).
Above equilibrium, firms supply more than buyers want, so sellers cut the price.
You've got it
Key idea
- demand up → price+quantity up; supply up → price down, quantity up
- below equilibrium = shortage (excess demand); above = surplus (excess supply)
- the price always moves back to equilibrium