Movement to a new equilibrium

The equilibrium price will remain unchanged if demand curve and supply curve remain
unchanged. If either of the curves shift, a new equilibrium will be formed

A change in demand
If one of the determinants of demand changes (other than price), whole demand curve will
shift. This shift results in movements along the supply curve to the new intersection point.

For example, in the following figure,

Suppose there is an increase in consumer income (other factor of demand) which

results in increase in demand and suppose our original price of the product is P e1

Hence, the demand curve shifts from D to D

1 2

Due to the shift in demand curve a shortage of (h - g) has been created

This would cause price to rise to the new equilibrium P e , i.e. there will be a movement
2

along the supply curve from point g to point i and a movement along the new demand
curve (D ) form point h to point i.
2

Equilibrium quantity will rise from Qe to Qe

1 2

Therefore the effect of shift in the demand curve results in changing of equilibrium from point
g to point i

Reference: Movement along the shifts in the demand curve

A change in supply
If one of the determinants of supply changes (other than price), whole supply curve will shift.
This shift results in movements along the demand curve to the new intersection point.

For example, in the following figure,

Suppose there is an increase in cost of production then supply curve will shift towards
the left from S to S
1 2

Due to the shift, there would be a shortage of g - j at the original price of P e

1

Due to the shortage, the price will rise from P e to P e and quantity will fall from Qe to
1 3 1

Qe3

In other words, there would be a demand movement along the demand curve from
point g to point k and movement along the new supply curve S from point j to point k
2

Therefore the effect of shift in the supply curve results in changing of equilibrium from point g
to point k

A change in demand and supply both

Sometimes a number of determinants might change. This might lead to a shift in both
curves. When this happens, equilibrium simply moves from the point where the old curves
intersected to the point where the new ones intersect.