What happens to market equilibrium when there is a shift in demand?

When there is a shift in demand, the market equilibrium adjusts to a new level as a result of the change in the quantity demanded at various prices. This shift occurs for reasons such as changes in consumer preferences, income levels, population, or the prices of related goods.

When demand increases, for example, the demand curve shifts to the right, leading to a higher equilibrium price and an increased quantity sold. Conversely, if demand decreases, the demand curve shifts to the left, resulting in a lower equilibrium price and a reduced quantity sold.

This dynamic nature of supply and demand highlights how markets continually seek to reach a balance, or equilibrium, while responding to external and internal influences. Thus, the market is always in flux and adjusts its equilibrium based on shifts in demand, ultimately leading to a new price and quantity that reflect the current market conditions.