pg-20
Change in Quantity is Indeterminate

Price falls unambiguously when demand shifts back and supply shifts out, but the change in quantity is indeterminate. As we can see on the graph to the right, if demand had shifted back a bit more, the equilibrium quantity would have fallen, and if demand had shifted back a bit less, the equilibrium quantity would have risen.

If supply had shifted out less, the equilibrium quantity would have fallen, and if supply had shifted out a bit more, the equilibrium quantity would have risen.

When demand shifts out and supply shifts back, the direction of change in equilibrium quantity depends on the relative amount of the two shifts. If all we know is the direction of the shifts of supply and demand, in this case, the change in equilibrium quantity is indeterminate.

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