Real-World Examples of Simultaneous Shifts in Demand and Supply

📚 Quick Study Guide

• 📈 Demand Shift: A change in factors *other than* price (like income or consumer preferences) that causes the entire demand curve to move.
• 📉 Supply Shift: A change in factors *other than* price (like technology or input costs) that causes the entire supply curve to move.
• ↔️ Simultaneous Shifts: When both demand and supply curves shift at the same time. The resulting change in equilibrium price and quantity depends on the magnitude of each shift.
• ⚖️ Price Effects:
  • ➡️ Demand increases, Supply increases: Quantity increases, Price is ambiguous.
  • ⬅️ Demand decreases, Supply decreases: Quantity decreases, Price is ambiguous.
  • ➡️ Demand increases, Supply decreases: Price increases, Quantity is ambiguous.
  • ⬅️ Demand decreases, Supply increases: Price decreases, Quantity is ambiguous.
• 📐 Ambiguous means: The change depends on the relative size of the shifts.

Practice Quiz

1. What happens to the equilibrium price when both demand and supply increase?
   1. It always increases.
   2. It always decreases.
   3. It remains constant.
   4. It is ambiguous (depends on the magnitude of the shifts).
2. Suppose a new technology decreases the cost of producing smartphones (shifting supply right), and at the same time, consumer income rises (shifting demand right). What is the most likely effect on the equilibrium quantity of smartphones?
   1. It will increase.
   2. It will decrease.
   3. It will remain the same.
   4. It is impossible to determine.
3. If demand decreases and supply increases simultaneously, the equilibrium price will:
   1. Increase.
   2. Decrease.
   3. Remain the same.
   4. Be indeterminate.
4. Consider the market for electric vehicles (EVs). If government subsidies for EVs increase (shifting demand right) and the cost of battery production decreases (shifting supply right), what happens to the equilibrium quantity of EVs?
   1. It increases.
   2. It decreases.
   3. It remains constant.
   4. It is ambiguous.
5. What happens to the equilibrium quantity when both demand and supply decrease?
   1. It always increases.
   2. It always decreases.
   3. It remains constant.
   4. It is ambiguous (depends on the magnitude of the shifts).
6. Suppose there is a sudden health scare associated with beef consumption (shifting demand left), and simultaneously, cattle farmers face higher feed costs (shifting supply left). What is the most likely effect on the equilibrium quantity of beef?
   1. It will increase.
   2. It will decrease.
   3. It will remain the same.
   4. It is impossible to determine.
7. If demand increases and supply decreases simultaneously, the equilibrium quantity will:
   1. Increase.
   2. Decrease.
   3. Be indeterminate.
   4. Remain constant.