What causes shifts in equilibrium price and quantity?

Shifts in equilibrium price and quantity are primarily caused by changes in supply and demand.

In more detail, the equilibrium price and quantity in a market are determined by the intersection of the supply and demand curves. Any factor that causes these curves to shift will change the equilibrium price and quantity.

On the demand side, changes in consumer preferences, income, population, or the prices of related goods can cause the demand curve to shift. For example, if consumers' income increases, they may demand more of a good, shifting the demand curve to the right and increasing the equilibrium price and quantity. Conversely, if the price of a substitute good decreases, consumers may demand less of the original good, shifting the demand curve to the left and decreasing the equilibrium price and quantity.

On the supply side, changes in production costs, technology, or the prices of related goods can cause the supply curve to shift. For instance, if the cost of raw materials for a product increases, producers may supply less of the good, shifting the supply curve to the left and increasing the equilibrium price while decreasing the equilibrium quantity. Alternatively, if a technological advancement makes production more efficient, producers may supply more of the good, shifting the supply curve to the right and decreasing the equilibrium price while increasing the equilibrium quantity.

Government policies can also affect the equilibrium price and quantity. Taxes can increase production costs and decrease supply, while subsidies can decrease production costs and increase supply. Regulations can also affect supply by imposing restrictions or requirements on producers.

In summary, shifts in equilibrium price and quantity are caused by any changes that affect the willingness and ability of consumers to buy a good (demand) or producers to sell a good (supply). These changes can come from a variety of sources, including changes in income, preferences, costs, technology, and government policies.