simultaneous shifts of demand and supply, we can determine the impact on either equilibrium price or equilibrium quantity, but not both.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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Now that you’ve mastered interpreting shifts in demand and supply, it’s time to add an­other wrinkle: simultaneous shifts in both demand and supply. Most of the time, when we explore simultaneous shifts of demand and supply, we can determine the impact on either equilibrium price or equilibrium quantity, but not both. Fill in the missing cells in the table to see why. Because two curves can shift in two directions, there are four cases to consider. The first column is done for you as an example—notice that you will either use an arrow or a question mark.

 

Case 1
Case 2
Case 3
Case 4
Change in demand
Increase
Increase
Decrease
Decrease
How demand change
affects price
How demand change
affects quantity
Change in supply
Increase
Decrease
Increase
Decrease
How supply change
affects price
How supply change
affects quantity
Combined effect of
demand and supply
?
on price
Combined effect of
demand and supply
on quantity
Transcribed Image Text:Case 1 Case 2 Case 3 Case 4 Change in demand Increase Increase Decrease Decrease How demand change affects price How demand change affects quantity Change in supply Increase Decrease Increase Decrease How supply change affects price How supply change affects quantity Combined effect of demand and supply ? on price Combined effect of demand and supply on quantity
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