2 CHANGES IN MARKET EQUILIBRIUM TEXT SUMMARY The previous section described disequi- prices. However, quantity supplied was librium that occurs along a demand or now greater than quantity demanded. supply curve. If a price is higher or lower Another word for this situation is than equilibrium price, market forces surplus. Producers reacted to the surplus push prices back towards equilibrium. by lowering prices, and eventually price Sometimes, however, changes in market and quantity reached a new equilibrium. conditions lead to the shift of an entire An outward shift in demand can be demand curve or supply curve. This caused by a fad, such as the surge in means that the quantity demanded popularity of a new toy. or supplied is now different at all price Buyers want more toys THE BIG IDEA levels. These changes also push a market than are supplied, and a When supply or into disequilibrium, and market forces shortage occurs. A shortage demand shifts, market tend to bring it back to equilibrium. is when quantity demanded price and quantity sold Technology, for example, can make a is greater than quantity sup- move towards a new good cheaper to produce. The earliest CD plied. During a shortage, equilibrium. players cost about $1,000. As technology producers and stores tend to improved, prices dropped. The supply raise prices. The market curve shifted to the right as supply price will rise until the quantity sup- increased. Producers were now willing to plied equals the quantity demanded, offer greater quantities of CD players at all and a new equilibrium is established. _ GRAPHIC SUMMARY: A Shift in Supply High price Technological improve- ments led to a shift in the supply of CD players. On Original this graph the shift is rep- Price supply resented by the curve marked New supply. Prices fell and quantity New supply demanded rose, leading Demand to a new equilibrium at point b. Low price Low Output High output output REVIEW QUESTIONS 1. What is the difference between a 2. Graph Skills Which has the surplus and a shortage? higher price, point a or point b