4.4 Supply and Demand Together

4.4 a. Equilibrium

Supply and demand curves intersect at the equilibrium price. This is the price at which the market will operate. ^[18]

Example: The prices in local food markets are adjusted to meet supply and demand quantities and prices.

^{Market Equilibrium [18]}

4.4 b. Changes in Equilibrium

If the demand curve shifts right, there is a greater quantity demanded at each price, the newly created shortage at the original price will drive the market to a higher equilibrium price and quantity. Similarly, if the demand decreases, the equilibrium will be at a lower price and quantity. ^[20]

Likewise, if the supply curve shifts left, the result will be an increase in the market equilibrium price and quantity. A rightward shift in the curve leads to a lower equilibrium price and a higher quantity. ^[20]

Example: When a newer model of a phone is released, the quantity demanded of older phones at different prices decreases. At the current price, there will be a surplus and a pressure for the price to decrease. The new equilibrium will be at a lower price and a lower quantity.

^{Changes in Market Equilibrium [21]}