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?
When both demand and supply curves shift in the same direction, the effect on equilibrium quantity can be unambiguously determined, whereas the effect on equilibrium price depends on the magnitude of the shifts. If both curves shift rightwards, the equilibrium quantity increases. Conversely, if both curves shift leftwards, the equilibrium quantity decreases. In both scenarios, the equilibrium price may increase, decrease, or remain unchanged depending on the extent of the shifts.
When demand and supply curves shift in opposite directions, the effect on equilibrium price can be unambiguously determined, whereas the effect on equilibrium quantity depends on the magnitude of the shifts. If the demand curve shifts rightward and the supply curve shifts leftward, the equilibrium price increases. If the demand curve shifts leftward and the supply curve shifts rightward, the equilibrium price decreases. In these cases, the equilibrium quantity may increase, decrease, or remain unchanged.
Explanation
The textbook context outlines specific rules for simultaneous shifts in demand and supply curves. For part (a), when shifts are in the same direction (both rightward or both leftward), the quantity changes definitively (increases for rightward, decreases for leftward), but the price change is ambiguous (depends on magnitude). For part (b), when shifts are in opposite directions, the price changes definitively (increases if demand rises/supply falls, decreases if demand falls/supply rises), but the quantity change is ambiguous. This distinction is summarized in Table 5.1 and the accompanying text of the chapter.