Excess Demand

Why do we call this an "equilibrium?" Let's see what happens when price is not high enough to make quantity supplied equal to quantity demanded:

Figure 6

What we see here is that the quantity demanded exceeds the quantity supplied -- we have excess demand. With a price of $30, quantity supplied is 500, while quantity demanded is about 1200. Thus, demanders will compete against one another, offering higher prices for the limited supply, and the price will rise.

Here's an animated diagram that shows about what we think will happen in these circumstances:

The Animation