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

Solution

When demand of a commodity increases and supply decreases ( i.e., when demand curve shifts to the right and supply curve shifts to the left), the equilibrium price will always increase but the equilibrium quantity may or may not be affected. There may be three situations:
(i) When the increase in demand is more than the decrease in supply, both equilibrium price and quantity will rise. See Fig. (a).
(ii) When increase in demand is equal to decrease in supply, then the equilibrium price will rise but the quantity remains the same. See Fig. (b).
(iii) When increase in demand is less than the decrease in supply, then the equilibrium price will rise but quantity will fall. See Fig. (c).

When the demand of a commodity decreases and supply increases ( i.e., when demand curve shifts to the left and supply curve shifts to the right), the equilibrium price will fall but the equilibrium quantity may or may not be affected. There may be three situations:
(i) When the decrease in demand is more than the increase in supply, both equilibrium price and quantity will fall. See Fig. (a).
(ii) When the decrease in demand is equal to the increase in supply, then the equilibrium price will fall but the quantity remains the same. See Fig. (b).
(iii) When the decrease in demand is less than the increase in supply, then the equilibrium price will fall but the quantity will rise. See Fig. (c).

Solution

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).

(a) both demand and supply curves shift in the same

(b) demand and supply curves shift in opposite direction