What is the effect of simultaneous decrease in both demand and supply of that good on its equilibrium price and quantity?

Solution

When both demand and supply of a commodity decrease (i.e., when demand and supply curves of a commodity shift 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 a decrease in demand is more than the decrease in supply, the equilibrium price will fall. See Fig. (a). (ii) When the decrease in demand is less than the decrease in supply, the equilibrium price will go up. See Fig. (b). (iii) When the decrease in demand is equal to a decrease in supply, there will be no change in the equilibrium price. See Fig. (c).

What is effect of a simultaneous change in demand and supply on equilibrium price?

If simultaneous shifts in demand and supply cause equilibrium price or quantity to move in the same direction, then equilibrium price or quantity clearly moves in that direction.

What happens when demand and supply decrease simultaneously?

If both demand and supply decrease, there will be a decrease in the equilibrium output, but the effect on price cannot be determined. 1. If both demand and supply decrease, consumers wish to buy less andfirms wish to supply less, so output will fall.

What is the effect of simultaneous change in demand and supply on price class 11?

Answer: In case of simultaneous changes in demand and supply, if the increase in demand is more than the increase in supply, then as we have seen in Fig. 1(b) above, the new equilibrium price becomes higher than the original equilibrium price.

What will be the effects of a decrease in both the market demand and supply of a commodity on its price?

3) When decrease in demand is less than decrease in supply the equilibrium price will rise and equilibrium quantity will increase.