Supply and Demand Together: Both Shift

now we're gonna study are most involved analysis of supply and demand, where we're gonna shift both supply and demand on the same graph. So this is gonna be pretty exciting. We're gonna be making two shifts on the same graph. And I want to make a quick note whenever we move, whenever we move both supply and demand on the same graph, we are always gonna have one of our variables price or quantity ambiguous. So one of them, we're not gonna be able to tell whether it goes up or down whenever we move both supply and demand. Okay? Um and we're gonna see why that is in a second. But first I want to show you the correct way to draw curves when you are shifting both because when you shift both it does make a difference how far you shift each curve. Alright, so let me show you this example here, I'm gonna show you two incorrect ways to do it and show you why we get different answers when we do it each of these ways and then I'll show you the correct way the way I like to do it. So it's really hard to mess it up. So here we go, let's do the first one. Um In all of these situations we're gonna be shifting supply to the right and demand also will shift to the right, okay. Um But whatever I'm doing here, it holds true for shifts to the left. Mixed shifts of right and left. Um So first I want to draw a situation where I'm gonna shift the supply curve really far to the right and the demand curve just a little bit to the right. Okay. So I'm gonna shift the supply curve way to the right. This exaggerated shift all the way over here. Okay. And I'm gonna shift the demand curve to the right as well, but I'm only gonna shift it just a little bit. So this tiny little shift comparatively. Right? So let's see what has happened to our equilibrium price and quantity in this situation, we started here where we had a price of P. One and a quantity of Q. One, right price axis quantity access. Um And now let's see where we are in our new situation and see how easy it is to see our new equilibrium. Even though we've got all these lines on the graph, it's gonna be where these two red curves intersect, right? Those are the new lines that we drew our new situation. So let's see what's happened here. It appears that our equilibrium price has decreased and it appears that our equilibrium quantity has increased. Right p. two. It looks like it's decreased. Right? I'm gonna put a question mark here because I don't want you to get confused later. That is not gonna end up being correct. And then we've got a quantity increase here. Right? So now let's see this next situation. I'm gonna do something similar except this time I'm the only shift supply a little bit and demand a lot in this one. So let's go ahead and start with demand and shifted a lot, I'm gonna shift it way out here, right? I did away way big shift in demand and a tiny shift in supply. This little baby shift in supply. Cool. Let's go ahead and analyze our points now. So this was our original equilibrium where we had this price and this quantity. And now lets look at our new equilibrium and notice in both of these cases we have shifted both to the right, okay, but we're gonna get a different answer in this case, look what has happened to our equilibrium price. Our equilibrium price in this case looks like it has increased and equilibrium quantity again looks like it has increased. Okay, so something about equilibrium quantity seems like we're doing it right, Let me get out of the way, just so you see the whole thing, right? But the big deal here is that our equilibrium price in one graph decreased and in the second graph it increased. So what is happening, we don't know in the end, we're gonna learn that this price variable is actually ambiguous and we can't make uh an actual conclusion about what has happened to price. So let me show you the correct way to put this on the graph and it will help you not make this mistake. So here let's go on to this last graph. I think there's space for me here. Alright, cool, so let's go ahead and in this one, whenever we have shifts in both, what I like to do is I shift them both an equal amount. Okay. So what I'm gonna do is shift the demand and supply as equally as I can, and then there's a good test to see if you did that, right? So I'm gonna shift this about this far to the right for our demand and about this far for our supply, right? So I did approximately a good job here. What what can tell you that you did a good job is you're gonna get this square right? You're gonna get this square. Let me do it in a different color. I'll do it in green this square and you want it to be as even as possible. All right. You want this square to come out as even as possible. Um And you'll get a good answer. Okay, so in this situation I didn't do it exactly. Perfect. But it's good enough for our analysis. So let's go ahead and label our original equilibrium and our new equilibrium right here. Cool. So the idea is that now the the price looks just about the same as where it was, right? It's just about where it was. It kind of looks like it went up a little bit because of how I drew it. But the idea is by drawing it like this, I can tell that it didn't, it definitely didn't change very much and that's how I know it's gonna be the ambiguous variable. Whereas our quad, he clearly has increased. There's no way to be ambiguous about this quantity definitely went up from Q. One to Q. To the price is very close to each other, right? If I had drawn both prices, they would have been something like that. And that's how I know it's ambiguous. The Q. Is certain right? We can totally tell that it's moved up but the price is very close to where it originally was. So I know that that is the ambiguous variable. And when I write this out, different teachers are gonna have different notation. Um Some might even write out the whole word ambiguous but to save space and time. I'm gonna do P question mark for when the price is ambiguous or Q. Question mark for when it's ambiguous. I've seen teachers use this this kind of double sided arrow for ambiguous meaning. I don't know which way it's gonna go left or right. So the same thing for quantity with that double sided arrow or something like they'll just write p ambiguous or unsure or not enough information. Right. Same thing Q ambiguous. So in this situation, what did we have, we had a situation where P was ambiguous and Q increased. Cool. So that was our answer for this question. If they were to ask us what had happened in this situation. Um Let's go ahead and analyze all the different combinations of shifts to the left and the right. And you'll see that there is kind of a pattern um when when we're doing the double shifts. All right, let's do that now.

now let's see what happens in all the different combinations of double shifting with supply and demand. So I've got our same steps listed here, right, We're not really gonna use them on this page, but it's just this is kind of the same process that we've been following. Um But let's go ahead and start with this one here on the left. Supply is shifting to the left and demand is shifting to the left, right, I'm just gonna shorten it here. Supply, left, demand left as well. Alright, so let's go ahead and draw our new curves here. Um I use red as usual. So our new demand curve to the left and remember our trick is to try and draw them as evenly in the shift to shift them both as evenly as possible. And you know, you did that when you get a nice uh square shape in the middle. So I'm gonna try and do that here. There we go. That was a really good one. You can see that this square came out really good in this one, and this is kind of what you're aiming for when you do this, is to get this square to come out as even as possible because it's gonna be really clear what is the ambiguous variable. So let's go ahead and mark our original equilibrium as the intersection of the blue lines are new equilibrium is the intersection of the red lines and let's go ahead and see which variable is ambiguous. So at our original price and you can kind of already see which one's gonna be ambiguous here. It seems that our price here is gonna be along the same line and let's look at our quantities, so quantity looks like it has clearly decreased where quantity one was their quantity too, was there. And price kind of stayed on top of each other. So that ends up being the ambiguous variable. So in here I'm gonna write p question mark, Q down right quantity clearly decreased in this situation, but the price, it was ambiguous as to what happened. So let's go ahead and do the same thing here on the right supply, shifting to the right and demand shifting to the right. So same thing, we're gonna draw the curves as evenly as we can in the shifts to try and get that square shape. So there's my new supply curve, you draw my new demand curve. Alright. We did a pretty good one here too. You can see we got a good square. So let's go ahead and analyze our original equilibrium and our new equilibrium. So start with price. It looks like the price again for both of them are along just about the same line. So we're gonna know that that's gonna be our ambiguous variable because they kind of stayed in the same place and we can expect the other variable to have changed our quantity variable. And it looks like it has our Q. One was here. Q. Two is here, quantity has clearly increased. So in this situation we have price being um ambiguous again and quantity has definitely increased. Cool. Alright let's go on to the bottom half of the page and I think I can fit in here for the first graph. I get lonely when I'm not on the screen. So you know, let's go ahead and do this next one. So now we have a situation where supply is shifting to the left and demand is shifting to the right. So let's start with supply to the left, demand to the right and again. We've got a pretty good square going here. So let's go ahead and mark our original equilibrium, our new equilibrium. And let's compare. So let's start with price again. Now we've got an original price here. P. One and a new price here, P. Two. So it looks like prices clearly increased, right? They're not landing on top of each other. Let's see what happens with quantity. We should expect something ambiguous with quantity, which it does look like. That's what we're getting right. It looks like they're right on top of each other at this quantity that's gonna end up being ambiguous. So we have a clear increase in our price but uh an ambiguous what's gonna happen with our quantity. We're not sure whether the quantity will go up or down. So let's go ahead and do this last one. Now supply is shifting to the right and demand is shifting to the left. So supply shifting to the right, demand shifting to the left. Pretty good. That's okay. But we did get that square shape. Um And let's go ahead and mark our points. So there is our original equilibrium and our new equilibrium. So at our original equilibrium we had this price right here, P. One. And what quantity, what price did we have here at our new equilibrium, P. Two. So it looks pretty clear that price has decreased. So quantity should be are ambiguous variable, which it looks like it is right there, right on top of each other, quantity is going to be ambiguous. So we have price decreasing for sure and quantity is ambiguous. Alright, so notice what we've got in all these situations up here when both moved the same way supply shifted to the left, demand shifted to the left. We've got ambiguous price. And since they both shifted to the left it was a bad thing, quantity decrease. And the other situation, they both shift to the right. Price being ambiguous, but now quantity increased with right word shifts and down here when they're doing opposite shifts. That's when we get an ambiguous quantity and then the price will either shift up or down. So we kind of have that going for us. But it is always going to be easier to just put it on the graph and analyze it for every problem. Alright, There's no way you get it wrong when you put it on the graph and you do the analysis. Cool. Alright, let's go ahead and do some double shifting practice problems.