A Typical Equilibrium

What Happens When The Balance Between Supply and Demand Changes?

Click to see an INCREASE IN SUPPLY

Click to see an INCREASE IN DEMAND

Observing an Increase in Supply

The increased supply of goods means that producers must lower their prices in order to convince consumers to purchase the extra supply. This decrease in price then causes more goods to be sold. Thus, we see a decrease in price, but an increase in quantity purchased.

Observing an Increase in Demand

The increased demand for goods means that consumers will compete against each other to purchase the limited supply. In so doing, they will drive the price for the goods up. This increase in price will then motivate producers to supply more goods. Thus, we see an increase in price, and an increase in quantity purchased.