Change in Market Equilibrium

Definition

A change in market equilibrium occurs when there is a shift in either the demand or supply curve, resulting in a new equilibrium price and quantity.

Analogy

Imagine you're at a party where the DJ is playing your favorite song. Suddenly, more people start dancing (increase in demand) or some people leave the dance floor (decrease in demand). In both cases, the equilibrium of the party changes as more or fewer people join the dance floor.

Related terms

Shift in Demand Curve: A shift in the demand curve occurs when there is a change in factors other than price that affect consumers' willingness to buy a product.

Shift in Supply Curve: A shift in the supply curve occurs when there is a change in factors other than price that affect producers' willingness to sell a product.

Equilibrium Price and Quantity: The equilibrium price is the price at which quantity demanded equals quantity supplied, resulting in no shortage or surplus. The equilibrium quantity is the quantity bought and sold at this price level.