Market Equilibrium
Simultaneous shifts
Say which of price and quantity is certain when both curves shift.
Sometimes demand and supply both shift at once. There are four cases, and in each, one result is certain and the other depends on the size of the shifts.
| Shifts | Certain | Uncertain |
|---|---|---|
| Both right | quantity rises | price may rise, fall or stay |
| Both left | quantity falls | price may rise, fall or stay |
| Demand right, supply left | price rises | quantity may rise, fall or stay |
| Demand left, supply right | price falls | quantity may rise, fall or stay |
A simple rule: when the curves shift the same way, quantity is certain; when they shift opposite ways, price is certain.
Example: demand and supply both shift right by the same amount. Quantity rises, and price stays unchanged. If demand had shifted further than supply, price would have risen too; if supply had shifted further, price would have fallen.
Do not try to memorise every case. Draw it: sketch the old demand and supply curves, move each one as the question says (bigger shift, bigger move), and read the new price and quantity off the new crossing point. Label the old equilibrium E and the new one E₁.
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