Simultaneous Shifts: Demand Left and Supply Right
Shows demand shifting left while supply shifts right. Equilibrium price falls, because a fall in demand and a rise in supply both push price down. The effect on quantity is indeterminate: the demand shift reduces quantity and the supply shift raises it, so the direction depends on which shift is larger. In this diagram the two effects cancel exactly, leaving quantity unchanged.
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Shows demand shifting left while supply shifts right. Equilibrium price falls, because a fall in demand and a rise in supply both push price down. The effect on quantity is indeterminate: the demand shift reduces quantity and the supply shift raises it, so the direction depends on which shift is larger. In this diagram the two effects cancel exactly, leaving quantity unchanged.
Key points
- Demand shifts left from D1 to D2 while supply shifts right from S1 to S2.
- Equilibrium price definitely falls. A fall in demand and a rise in supply both push price down.
- The effect on quantity is indeterminate. The demand shift reduces quantity and the supply shift raises it.
- In this diagram the two effects cancel exactly, leaving quantity unchanged. That is a special case, not the general result.
- Which way quantity moves depends on which shift is larger.
Exam tip
Establish which variable is determinate before attempting the other. Here price definitely falls; the quantity effect needs the relative size of the two shifts.
Common mistakes
The commonest error is describing both curves as shifting "down". One moves left and the other right, and calling both downward loses the distinction that makes the price effect determinate. Students also claim quantity definitely falls, when only price is determinate here, and some treat the unchanged quantity in this diagram as the general result rather than the special case it is.
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