Demand Shift In, Supply Shift Out, Price Falls, Quantity Indeterminate

Suppose, consumer concern for Genetically Modified (GM) tomatoes causes demand for GM tomatoes to fall. This shift will tend to cause the equilibrium price and quantity to fall. At the same time, suppose that farmers choose to grow more genetically modified tomatoes, shifting out the supply. An increase in supply will tend to cause equilibrium price to fall and quantity to increase.

These two shifts both cause price to fall, but they have offsetting effects on equilibrium quantity, resulting in an indeterminate change in quantity.

The demand curve for genetically modified tomatoes shifts back from D1 to D2, while the supply curve for GM tomatoes shifts out from S1 to S2. Equilibrium price falls from to .

We show equilibrium quantity remaining virtually unchanged with and being almost identical.

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