42CHAPTER 3.EQUILIBRIUM AND EFFICIENCY3.4Equilibrium in Two MarketsSuppose that the economy is in the disequilibrium depicted in figure 3.4.Figure 3.4: Disequilibrium in the Corn and Wheat MarketsWhen producers bring their corn and wheat to the market, they willrealize that there is an oversupply of wheat and an undersupply of corn.Their response will be to raise the price of corn (fromPC1toPC2) andreduce the price of wheat (fromPW1toPW2). The price ratio-PW/PCwilltherefore become closer to zero, flattening the iso-profit lines. As figure 3.5shows, this will increase production of corn and reduce production of wheat,as production moves fromS1toS2.Figure 3.5 also shows the adjustment made by consumers: they move fromD1toD2. Unlike the adjustment made by producers, I can’t be sure thatconsumers will behave in this way: aggregate demand is made up of manysmall consumers, each of whom may react in a different way. Nevertheless,it seems reasonable to assume that a rise in the price of corn will reducedemand for corn and that a fall in the price of wheat will increase demandfor wheat. If one accept that consumers behave in this way, I can redraw thedemand and supply curves (we must redraw them because both prices havechanged) as shown in figure 3.6.