2.7 Market Disequilibrium and Changes in Equilibrium

a. Define a surplus and shortage. b. Explain (using graphs where appropriate) how changes in underlying conditions and shocks to a competitive market can alter price, quantity, consumer surplus, and producer surplus. c. Calculate (using data from a graph or table as appropriate) changes in price, quantity, consumer surplus, and producer surplus in response to changes in market conditions or market disequilibrium.

• Whenever markets experience imbalances—creating disequilibrium prices and quantities, surpluses, and shortages—market forces drive price and quantity toward equilibrium.
• Factors that shift the market demand and market supply curves cause price, quantity, consumer surplus, producer surplus, and total economic surplus (within that market) to change. The impact of the change depends on the price elasticities of demand and supply.
• Enduring understanding MKT-4: Although equilibria are stable, an economy can move from one equilibrium to another if market conditions change.