Unformatted text preview: shortage nor a surplus. Neither buyers nor sellers have an
incentive to change the price. The price at which the quantity
demanded equals the quantity supplied is the equilibrium
price. And 10 million bars a week is the equilibrium quantity.
animation 9160335_CH03_p053-080.qxd 6/22/09 8:56 AM Page 65 Market Equilibrium million bars a week, as shown by the blue arrow. At
each price below $1.50 a bar, there is a shortage of bars.
For example, at $1.00 a bar, the shortage is 9 million
bars a week, as shown by the red arrow. Price Adjustments
You’ve seen that if the price is below equilibrium,
there is a shortage and that if the price is above equilibrium, there is a surplus. But can we count on the
price to change and eliminate a shortage or a surplus?
We can, because such price changes are beneficial to
both buyers and sellers. Let’s see why the price
changes when there is a shortage or a surplus.
A Shortage Forces the Price Up Suppose the price of an energy bar is $1. Consumers plan to buy 15 million
bars a week, and producers plan to sell 6 million bars a
week. Consumers can’t force producers to sell more
than they plan, so the quantity that is actually offered
for sale is 6 million bars a week. In this situation, powerful forces operate to increase the price and move it
toward the equilibrium price. Some producers, noticing lines of unsatisfied consumers, raise the price.
Some producers increase their output. As producers
push the price up, the price rises toward its equilibrium. The rising price reduces the shortage because it
decreases the quantity demanded and increases the
quantity supplied. When the price has increased to the
point at which there is no longer a shortage, the forces
moving the price stop operating and the price comes
to rest at its equilibrium.
A Surplus Forces the Price Down Suppose the price
of a bar is $2. Producers plan to sell 13 million bars a
week, and consumers plan to buy 7 million bars a
week. Producers cannot force consumers to buy more
than they plan, so the quantity that is actually bought
is 7 million ba...
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