Copyright

What are factors that affect market equilibrium?

Question:

What are factors that affect market equilibrium?

Supply, Demand, and Equilibrium:

Supply is the relationship between the price of the good and the quantity supplied while demand is the relationship between the price of the good and the quantity demanded. The market is in equilibrium when the supply equals the demand. At equilibrium, there is a price such that the quantity supplied equals the quantity demanded.

Answer and Explanation:

A competitive equilibrium is only good for one point in time. If anything occurs that causes demand or supply to change, the respective curves will shift and the market will adjust to the new equilibrium. For both supply and demand, an increase is represented by a shift to the right while a decrease is shown by a leftward shift.

  1. If demand increases, the curve will shift to the right, resulting in a new equilibrium at a higher price and quantity.
  2. If demand decreases, the curve will shift to the left, resulting in a new equilibrium at a lower price and quantity.
  3. If supply increases, the curve will shift to the right, resulting in a new equilibrium at a higher quantity, but a lower price.
  4. If supply decreases, the curve will shift to the left, resulting in a new equilibrium at a higher price, but a lower quantity.

Learn more about this topic:

Loading...
Dynamic Equilibrium: Definition, Function & Examples

from College Chemistry: Help and Review

Chapter 11 / Lesson 12
43K

Related to this Question

Explore our homework questions and answers library