Both Curves Shift: Patio Furniture
A recession pushes demand for a normal good left while a cheaper input pushes supply right, so price clearly falls but quantity is indeterminate.
Both Curves Shift: Patio Furniture
Supply and DemandA recession pushes demand for a normal good left while a cheaper input pushes supply right, so price clearly falls but quantity is indeterminate.
Equilibrium at Quantity 57, Price ($) 44
Start in equilibrium
The market for plastic patio furniture begins in equilibrium where supply and demand cross. Two changes are about to hit at the same time, so keep track of what each one does on its own before combining them.
Now try it yourself: shift the curves in a graded FRQ drill, or open this graph in the free sandbox.
Both Curves Shift: Patio Furniture, step by step
- 1
Start in equilibrium
The market for plastic patio furniture begins in equilibrium where supply and demand cross. Two changes are about to hit at the same time, so keep track of what each one does on its own before combining them.
- 2
A recession cuts incomes
A recession lowers household incomes. Patio furniture is a normal good, so at every price people buy less of it and demand shifts left. On its own this would lower BOTH the price and the quantity.
- 3
Plastic gets cheaper
At the same time the price of plastic resin, the main input, drops sharply. Each chair is cheaper to make, so producers offer more at every price and supply shifts right. On its own this would lower the price but RAISE the quantity.
- 4
Price is determinate
Look at price first. The demand decrease pushes price down and the supply increase also pushes price down, so the two forces agree. Whatever their relative sizes, the equilibrium price ends up lower than where it started.
- 5
Quantity is indeterminate
Now look at quantity. The demand decrease pulls quantity down while the supply increase pushes it up, so the answer depends on which shift is larger. This walkthrough is the sign-flipped mirror of the lithium battery case, where demand rises and supply falls: there the certain answer is that price rises, and here it is that price falls. Answering that quantity is indeterminate without knowing the relative magnitudes is the correct response and earns the mark.
- 6
The rule for every double shift
When two curves shift, one variable is determinate and the other is indeterminate. Work out what each shift would do on its own, then find the variable that both shifts push the same way. That one is your certain answer, and the other is indeterminate.
Where it ends up
The equilibrium price definitely falls, because both shifts push it down; the change in quantity is indeterminate because the two shifts push it in opposite directions.
Now draw it yourself
Same graph, graded on whether you move the right curve and leave the rest alone.
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