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Figure 2.6 Why Pe Is the Equilibrium Price
(a) At the price Phigh above the equilibrium price Pe, producers supply the quantity image, while consumers demand only image. This results in an excess supply of the good, as represented by the distance between points W and X. Over time, price will fall and the market will move toward equilibrium at point E.(b) At the price Plow below the equilibrium price Pe, producers supply the quantity image, while consumers demand image. This results in an excess demand for the good, as represented by the distance between points Y and Z. Over time, price will rise and the market will move toward equilibrium at point E.