AP® Microeconomics · Unit 2 · Topic 2.7

Double Shifts and Indeterminate Outcomes

When supply and demand curves shift at the same time, you can only be certain about the variable both shifts push the same direction. The other variable depends on which shift is bigger, and without numbers you cannot know.

Every shift in demand or supply pushes price and quantity in a predictable pair of directions. Demand up means price up and quantity up. Supply down means price up but quantity down. The trouble starts when both curves move at once. Line up the two effects: if they agree on a variable, that variable's direction is locked in no matter how big either shift is. If they disagree, the outcome depends entirely on which shift is larger, and without that information the direction is genuinely unknown, not just hard to figure out.

Take demand rising and supply falling together. Both shifts push price up, so price rising is certain. But demand pulls quantity up while supply pulls quantity down, so quantity could go either way depending on which effect dominates. Flip the example: demand rises by 30 units and supply rises by 60 units. Both shifts push quantity up, so quantity rising is certain. But demand pushes price up while supply pushes price down, so price is the uncertain one here, and it would fall because the supply increase is the larger shift.

This topic is the payoff of everything else in the unit. Once you know the four basic shift rules cold, double shifts are just bookkeeping: find where the two effects agree, call that one certain, and flag the other as depending on relative size. It also sets up welfare analysis later, where you will need to know price and quantity precisely before you can say anything about surplus or the effect of a tax.

Key terms

Indeterminate outcome
A result that cannot be signed without knowing the relative size of two opposing shifts.
Equilibrium
The price and quantity where the quantity demanded equals the quantity supplied.
Shift
A change in the entire demand or supply curve caused by a non-price factor.
Relative magnitude
The comparative size of two shifts, which determines the direction of the variable they push in opposite ways.

Watch it explained

  1. How it worksHow does the relative size of two shifts decide which variable stays uncertain?
  2. Worked exampleShow me price and quantity when demand rises and supply falls at the same time.
  3. Worked exampleFind what happens to price and quantity when demand rises 30 units and supply rises 60 units.
  4. Going furtherWhat changes about a double shift when one curve barely moves and the other moves a lot?

Check yourself

Your turn1 of 2
Demand is Qd = 129 - 5P and supply is Qs = 47 + 5P, using the same slope magnitude on both sides. Demand rises by 15 units at every price and supply rises by 7 units at every price. What is the new equilibrium quantity?

End of topic.