Macroeconomics
At $180, Qs is equal to 600 units and Qd is equal to 200 units. This results in a surplus of 400 units.
Producersarehappytosupplyatthishighpricesinceitallowsthemtomakemoreproft.However,the low demand level forces them to reduce prices in order toattractconsumers.Thisprocesscontinues until the market is back at its equilibrium point X where price is equal to $140. Changes in Market Equilibrium The equilibrium price and quantity in a market change when there are changes in the demand and supply for a product. When the supply and/or demand curve shifts, their intersection point changes resulting in a new equilibrium point. These changes and new equilibrium levels are illustratedinthefollowingtableand diagram where point X is the original equilibrium.
Table 7: Summary of Changes in Market Equilibrium
Change
Change in Equilibrium Price (P*)
Change in Equilibrium Quantity (Q*)
Example on Graph
Supply increases ↑ (shifts right)
P ↓
Q ↑
X → W
Supply decreases ↓ (shifts left)
P ↑
Q ↓
X → R
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