How are the equilibrium price and quantity affected when –
(a) Both demand and supply curves shift in the same direction?
(b) Demand and supply curves shift in opposite directions?
The change in equilibrium price and quantity in following two cases are explained below –
(a) Both demand and supply curves shift in the same direction?
When both demand and supply curve shift in the same direction there can be six types of cases. All of them are being explained with the help of following table –
S.no | Case | Equilibrium Price | Equilibrium Quantity |
1 | Increase in demand is equal to increase in supply | Unchanged | Increases |
2 | Increase in demand is more than increase in supply | Increases | Increases |
3 | Increase in demand is less than increase in supply | Falls | Increases |
4 | Decrease in demand is equal to decrease in supply | Unchanged | Falls |
5 | Decrease in demand is more than decrease in supply | Falls | Falls |
6 | Decrease in demand is less than decrease in supply | Increases | Falls |
(b) Demand and supply curves shift in opposite directions?
When demand and supply curve shift in the opposite directions, there can be six types of cases. All of them are being explained with the help of following table –
S.no | Case | Equilibrium Price | Equilibrium Quantity |
1 | Increase in demand is equal to decrease in supply | Increases | Unchanged |
2 | Decrease in demand is more than increase in supply | Falls | Falls |
3 | Decrease in demand is less than increase in supply | Falls | Increases |
4 | Decrease in demand is equal to increase in supply | Unchanged | Increases |
5 | Increase in demand is more than decrease in supply | Increases | Increases |
6 | Increase in demand is less than decrease in supply | Increases | Falls |