Imagine a market in transition, where the demand for chocolate bars has decreased
but the current price has not yet settled to a new, lower equilibrium price.
Suppliers will produce chocolate bars based on the current price—which is now
too high—while consumers have decreased the quantity they demand. Put another
way, suppliers will produce a greater quantity of chocolate bars than consumers
are willing to purchase, resulting in a surplus. Eventually, the chocolate bar
producers will realize chocolate bars aren't selling, so they will reduce the
price until it settles at the equilibrium price.
Animated graph should be displayed here.
For each question below, click on the question to reveal the answer.
The demand for chocolate has decreased. While the market is in transition, will there
be a shortage or surplus?
Surplus. The decrease in demand will lead to the quantity supplied being greater
than the quantity demanded. Competition among sellers will lead to falling prices
for chocolate bars. As the price decreases, quantity supplied will decrease and
quantity demanded will increase until the surplus disappears.
Will the new equilibrium price be higher or lower?
Lower. The decrease in demand will result in a lower equilibrium price.
Will the new equilibrium quantity be higher or lower?
Lower. The decrease in demand will result in a lower equilibrium quantity.