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Module 1: The competitive market system

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XSIQ
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Economics - Disequilibrium

Disequilibrium

If the price was above the equilibrium price, excess supply and a surplus
would occur. If the price was below equilibrium, excess demand and a
shortage would occur. If the price mechanism is allowed to operate free of
government intervention, equilibrium will automatically be established.

The equilibrium price and quantity traded in a free and competitive market
will change when there is change in the factors that affect demand or
supply. Such changes will cause the demand or supply curve to shift and
intersect at a different point, and so a new equilibrium position is
established with a new equilibrium price and a new equilibrium quantity.

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