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Glossary
Shifting Chocolate Bar Demand and Changes in Equilibrium

As discussed in detail earlier, a change in demand will change the equilibrium price and quantity. Let's return to an earlier example and imagine that scientists found new health benefits of eating chocolate, thus causing the demand for chocolate bars to rise. With the shift in demand and no change in supply, the market would look like this: Notice that when the demand curve shifts to the right (from D1 to D2), the equilibrium price increases from \$1.20 to \$1.60 and the equilibrium quantity increases from 300 to 400. So, an increase in demand will cause both the equilibrium price and the equilibrium quantity to increase.

Now imagine economic conditions cause the incomes of many Americans to decrease. Because chocolate bars are normal goods, the demand curve would shift to the left because people would buy fewer chocolate bars at any price. With a decrease in demand and no change in supply, the market for chocolate bars would look like this: Notice that when the demand curve shifts left (from D1 to D2), the equilibrium price decreases from \$1.20 to \$0.80 and the equilibrium quantity decreases from 300 to 200. So, a decrease in demand will cause both the equilibrium price and the equilibrium quantity to decrease.

The chart below describes how a change in demand affects the equilibrium price and equilibrium quantity. When demand increases, the demand curve shifts to the right, increasing the equilibrium price and the equilibrium quantity. When demand decreases, the curve shifts to the left, decreasing the equilibrium price and the equilibrium quantity.

 Increase in demand Decrease in demand Demand curve shift Right Left Equilibrium price Increase Decrease Equilibrium quantity Increase Decrease  