Simultaneous shifts of demand and supply
Topic: Markets, Equilibrium and Government Intervention · NCERT: Class 12, Ch 5 "Market Equilibrium"
Meaning
Sometimes demand and supply shift at the same time. Then one outcome is certain, and the other is ambiguous, meaning it depends on which shift is bigger.
| Demand | Supply | Quantity | Price |
|---|---|---|---|
| Left | Left | Decreases | Ambiguous |
| Right | Right | Increases | Ambiguous |
| Left | Right | Ambiguous | Decreases |
| Right | Left | Ambiguous | Increases |
Rule: if both curves shift in the same direction, quantity is certain and price is ambiguous. If they shift in opposite directions, price is certain and quantity is ambiguous.
Example
Early in COVID-19 (2020), demand for masks rose (right shift) while supply lagged. Later supply also increased (right shift). Mask output clearly rose. Price first went up sharply and then fell, depending on which shift was bigger at each stage.
Don't confuse with
- Single-curve shifts: when only one curve moves, both price and quantity have a definite direction. There is nothing ambiguous.