Assume that the supply curve for a commodity shifts to the left and the demand curve shifts to the right,both by the same degree.Then,in comparison to the initial equilibrium,the new equilibrium will be characterized by ________.

Question

Quizplus · Accepted Answer

When the supply curve shifts to the left, it means that suppliers are producing less of the commodity at every given price. At the same time, when the demand curve shifts to the right, it means that consumers are willing to buy more of the commodity at every given price. Therefore, when both these curves shift by the same degree, the equilibrium quantity will increase, but the change in price will depend on the relative magnitude of the shifts. If the demand curve shifts to a greater degree than the supply curve, the price will increase, and if the supply curve shifts to a greater degree than the demand curve, the price will decrease. In this case, since the degree of the shifts is the same, the price will remain the same if they shift by equal amounts. However, since the equilibrium quantity will increase, the new equilibrium will be characterized by a higher quantity and the same price, which is option D.

Assume That the Supply Curve for a Commodity Shifts to the Left