Supply and Demand
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…demand at the previous equilibrium price. The price will be forced up causing an expansion in supply until the new equilibrium is reached at P1. An increase in demand raises both equilibrium price and quantity.
A decrease in demand creates excess in supply and the previous equilibrium price (P1). The price will be forced down causing a contraction in supply until equilibrium is reached at e. As demand falls, so will equilibrium price and quantity.
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