Question

How are the equilibrium price and quantity affected when both demand and supply curves shift in the same direction?

Answer 1

When both demand and supply of a commodity increase (i.e., which both the demand and supply curve of a commodity shifts to the right), the equilibrium quantity will increase but the equilibrium price may or may not be affected. There may be three situations:
(i) When both demand and supply of a commodity increase in equal proportions, the equilibrium price will remain the same. See Fig. (a).
(ii) When both demand and supply increase but the increase in demand is more than the increase in supply, equilibrium price will rise. See Fig. (b).
(iii) When both demand and supply increase but the increase in demand is less than the increase in supply, equilibrium price will fall. See Fg. (c).
The following diagrams illustrate these three cases:


When both demand and supply of a commodity decease (i.e., when demand and supply curves of a commodity shifts to the left), the equilibrium quantity will fall but the equilibrium price may or may not be affected. There may be three situations:
(i) When decrease in demand is more than decrease in supply, equilibrium price will fall. See Fig. (a).
(ii) When decrease in demand is less than decrease in supply, equilibrium price will go up. See Fig. (b).
(iii) When decrease in demand is equal to decrease in supply, there will be no change in equilibrium price.
See Fig. (c).