Changes in Both Supply and Demand

A decrease in supply will result in an increase is the equilibrium price and a decrease in equilibrium quantity.

An increase in supply (while demand is constant) will cause the equilibrium price to decrease and the equilibrium quantity to increase.

When supply and demand both change, the direction of the change of either equilibrium price or quantity can be known but the effect on the other is indeterminate. An increase in supply will push the market price down and quantity up while an increase in demand will push both market price and quantity up. The effect on quantity of an increase in both supply and demand will increase the equilibrium quantity while the effect on price is dependent on the magnitude of the shifts and relative structure (slopes) of supply and demand. The effect of an increase in both supply and demand is shown in Figure.

Should demand decrease and supply increase, both push the equilibrium price down. However, the decrease in demand reduces the equilibrium quantity while the increase in supply pushes the equilibrium quantity up. The price must fall, the quantity may rise, fall or remain the same. Again it depends on the relative magnitudes of the shifts in supply and demand and their slopes.

Дата добавления: 2014-01-11