Changes in Market Equilibrium

In this lesson, students will identify factors that can shift a market into disequilibrium.

Students will be able to identify and/or define the following terms:

Disequilibrium

Surplus

Shortage

If there are lots of apples in the marketand little demand for apples, market

disequilibrium occurs.

Let’s Review Equilibrium!

• Equilibrium occurs when quantity supplied equals quantity demanded.

• Economists state that a market will tend toward equilibrium.

• This means that price and quantity will gradually move towards their equilibrium levels.

Equilibrium is the point where the supplycurve intersects the demand curve.

Let’s Review Disequilibrium!

• Disequilibrium occurs when the quantity supplied does not equal the quantity demanded.

• Disequilibrium occurs when the price is not right.

• If the price is too high or too low for that particular market, disequilibrium occurs.

The original equilibrium price does notwork when the supply curve shifts.

Surplus

• A surplus occurs when quantity supplied is greater than quantity demanded.

• Another term for surplus is excess supply.

• When a surplus occurs, the price must be lowered to restore the market to equilibrium.

Too many cookies and not enoughconsumers creates a surplus.

Shortage

• A shortage is a situation in which quantity demanded is greater than quantity supplied.

• Another term for shortage is excess demand.

• When a shortage occurs, prices must be raised to restore the market to equilibrium.

When quantity demanded is created thanquantity supplied, a shortage occurs.

Prices

• Market disequilibrium occurs when the price is not right for that particular market.

• If the price is too low for that particular market, demand is encouraged and shortage occurs.

• If the price is too high for that particular market, demand is discouraged and surplus occurs.

The beautiful thing about price is thatit can easily be changed to restore

equilibrium to the market.

Fortunately, price is flexible and marketequilibrium can be restored.

Questions for Reflection:

• How does equilibrium differ from disequilibrium?

• Why do surpluses occur?

• Why do shortages occur?

• How can a market in disequilibrium be restored to equilibrium?

• How must prices be changed to solve the problems of surplus and shortage?