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• In competitive markets, prices adjust to the equilibrium level at which quantity demanded equals quantity supplied.

• The equilibrium price and quantity are those indicated by the intersection of the supply and demand curves for any product or resource.

• An increase in demand increases equilibrium price and quantity; a decrease in demand decreases equilibrium price and quantity.

• An increase in supply reduces equilibrium price but increases equilibrium quantity; a decrease in supply increases equilibrium price but reduces equilibrium quantity.

• Over time, equilibrium price and quantity may change in directions that seem at odds with the laws of demand and supply because the other-things-equal assumption is violated.

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