Question

Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity.

Answer 1

There are three possible situations of a simultaneous rightward shift of both the demand and supply curves:
(i) When demand increases more than supply, equilibrium price and quantity both will rise.
(ii) When demand and supply increase equally, equilibrium price will remain stable and equilibrium quantity will rise.
(iii) When demand increases less than supply, equilibrium price will fall and equilibrium quantity will rise.