pg-18
Demand and Supply Both Shift In

On the graph to the right, we can see more clearly why the price change is indeterminate. If supply had shifted back a bit more than in the original graph on the previous page, the equilibrium price would have risen. In other words, would be greater than . If, however, supply had shifted back by a bit less, would be below and equilibrium price would have fallen.

Likewise, if demand had shifted back by less, equilibrium price would have risen, and if demand had shifted back by more than originally, equilibrium price would have fallen.

Thus, if all we know is that demand and supply both shifted back, we cannot predict if the equilibrium price will rise or fall, so the direction of the change in price is indeterminate.

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