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Unformatted text preview: rs a week. In this situation, powerful
forces operate to lower the price and move it toward
the equilibrium price. Some producers, unable to sell
the quantities of energy bars they planned to sell, cut
their prices. In addition, some producers scale back
production. As producers cut the price, the price falls
toward its equilibrium. The falling price decreases the
surplus because it increases the quantity demanded
and decreases the quantity supplied. When the price
has fallen to the point at which there is no longer a
surplus, the forces moving the price stop operating
and the price comes to rest at its equilibrium. 65 The Best Deal Available for Buyers and Sellers When the price is below equilibrium, it is forced
upward. Why don’t buyers resist the increase and
refuse to buy at the higher price? Because they value
the good more highly than the current price and they
can’t satisfy their demand at the current price. In
some markets—for example, the markets that operate
on eBay—the buyers might even be the ones who
force the price up by offering to pay a higher price.
When the price is above equilibrium, it is bid
downward. Why don’t sellers resist this decrease and
refuse to sell at the lower price? Because their minimum supply price is below the current price and they
cannot sell all they would like to at the current price.
Normally, it is the sellers who force the price down
by offering lower prices to gain market share.
At the price at which the quantity demanded
and the quantity supplied are equal, neither buyers
nor sellers can do business at a better price. Buyers
pay the highest price they are willing to pay for the
last unit bought, and sellers receive the lowest
price at which they are willing to supply the last
When people freely make offers to buy and sell
and when demanders try to buy at the lowest possible
price and suppliers try to sell at the highest possible
price, the price at which trade takes place is the equilibrium price—the price at which the quantity
demanded equals the quantity supplied. The price
coordinates the plans of buyers and sellers, and no
one has an incentive to change it. Revi...
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