pg-14
Price change is indeterminate when both supply and demand shift out

As we can see on the graph to the right, when demand and supply both shift out, the price can rise or fall. This is why we say the price change is indeterminate.

On the previous page, we showed a case in which the price neither rose nor fell. As we can see here, if demand shifted out by a bit more than on the previous graph, the equilibrium price would have risen. would have been greater than . If demand had shifted out by a little less, would have been less than . If the shift out in supply to S2 had been slightly less, price would have risen, and if supply had shifted out slightly more, price would have fallen.

This is why, when all we know is that both demand and supply are shifting out, we can say with certainty that equilibrium quantity will rise, but that we cannot predict if price will rise, fall, or remain unchanged.

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