16. Demand and Supply Change in the Same Direction

• If both the demand and the supply of a good or service increase, both the demand and supply curves shift rightward. The quantity unambiguously increases but the effect on the price is ambiguous.

• If the increase in demand is greater than the increase in supply, the price rises.

• If the increase in demand is the same size as the increase in supply, the price does not change.

• If the increase in demand is less than the increase in supply, the price falls.

• If both the demand and the supply of a good or service decrease, both the demand and supply curves shift leftward. The quantity unambiguously decreases but the effect on the price is ambiguous.

• If the decrease in demand is greater than the decrease in supply, the price falls.

• If the decrease in demand is the same size as the decrease in supply, the price does not change.

• If the decrease in demand is less than the decrease in supply, the price rises.

• The figure illustrates an increase in both demand and supply. In the figure the demand curve shifts from D₀ to D₁ and the supply curve shifts from S₀ to S₁. The shifts are the same size, so the equilibrium price does not change and the equilibrium quantity increases from 30 to 50.

17. Demand and Supply Change in the Opposite Directions

• If the demand increases and the supply decreases, the demand curve shifts rightward and the supply curve shifts leftward. The price unambiguously rises but the effect on the quantity is ambiguous.

• If the increase in demand is greater than the decrease in supply, the quantity increases.

• I

  Price (dollars per pizza)	Quantity demanded (pizzas per week)
  14	500
  16	400

  f the increase in demand is the same size as the decrease in supply, the quantity does not change.

• If the increase in demand is less than the decrease in supply, the quantity decreases.

• If the demand decreases and the supply increases, the demand curve shifts leftward and the supply curves shifts rightward. The price unambiguously falls but the effect on the quantity is ambiguous.

• If the decrease in demand is greater than the increase in supply, the quantity decreases.

• If the decrease in demand is the same size as the increase in supply, the quantity does not change.

• If the decrease in demand is less than the increase in supply, the quantity increases.

• The figure illustrates an increase in demand and a decrease in supply. In the figure the demand curve shifts from D₀ to D₁ and the supply curve shifts from S₀ to S₁. The shifts are the same size, so the equilibrium quantity does not change and the equilibrium price rises from $3 to $5.