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.