Both Curves Shift: Price Is Certain, Quantity Is Not
Demand rises while supply falls, so price definitely rises but quantity is indeterminate.
Both Curves Shift: Price Is Certain, Quantity Is Not
Supply and DemandDemand rises while supply falls, so price definitely rises but quantity is indeterminate.
Equilibrium at Quantity 57, Price ($) 44
Start in equilibrium
The market for lithium batteries begins in equilibrium. Two changes are about to hit at once, pushing in different directions.
Now try it yourself: shift the curves in a graded FRQ drill, or open this graph in the free sandbox.
Both Curves Shift: Price Is Certain, Quantity Is Not, step by step
- 1
Start in equilibrium
The market for lithium batteries begins in equilibrium. Two changes are about to hit at once, pushing in different directions.
- 2
Electric car demand booms
Carmakers scale up production, so at every price more batteries are wanted. Demand shifts right, which on its own would raise both price and quantity.
- 3
A key mineral becomes scarce
At the same time, a mining disruption raises input costs. Supply shifts left, which on its own would raise price and LOWER quantity.
- 4
Price is determinate
Both shifts push price in the same direction, up. Whatever their relative sizes, the equilibrium price is higher than where it started.
- 5
Quantity is indeterminate
The two shifts push quantity in opposite directions, so the answer depends on which is larger. The honest response to an exam question is that quantity is indeterminate without knowing the relative magnitudes, and saying so earns the mark. This is the mirror image of the case where both curves shift right: quantity is certain and price is not.
Where it ends up
The equilibrium price definitely rises; the change in quantity depends on which shift is larger.
Now draw it yourself
Same graph, graded on whether you move the right curve and leave the rest alone.
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