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Similarly, a shift in the supply curve will also affect the equilibrium. An increase in supply (perhaps due to a technological innovation) shifts the supply curve to the right. At the original equilibrium price, there's now a surplus, so the price falls. As the price falls, the quantity demanded increases, and a new equilibrium is established at a lower price and a higher quantity. Conversely, a decrease in supply (perhaps due to a natural disaster) shifts the supply curve to the left, leading to a shortage at the original equilibrium price. The price rises, the quantity demanded decreases, and a new equilibrium is established at a higher price and a lower quantity. By analyzing these shifts, businesses can make informed decisions about pricing, production, and investment. Understanding how demand and supply interact is essential for navigating the complexities of the market and achieving success.
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