Consider the following statements regarding the simultaneous shift of demand and supply curves: 1. If demand shifts left and supply shifts left, equilibrium price definitely increases. 2. If demand shifts left and supply shifts left, equilibrium quantity definitely decreases. 3. The direction of price change is independent of the relative magnitude of the shifts. Which of the statements given above is/are correct?

The correct option is 2 only Explanation When both demand and supply curves shift simultaneously, the effect on equilibrium depends on the direction and relative magnitude of these shifts. However, certain outcomes may still be determinate. Statement-wise Analysis: - Statement 1 - Incorrect. A leftward shift of both demand and supply reduces equilibrium quantity in all cases, as both forces act to decrease quantity. - Statement 2 - Correct. The effect on equilibrium price is indeterminate when both curves shift left; price may increase, decrease, or remain unchanged depending on the relative magnitude of the shifts. - Statement 3 - Incorrect. The direction of price change is not independent of the relative magnitude of demand and supply shifts. Key Takeaway: When demand and supply both shift left, equilibrium quantity definitely falls, while the change in equilibrium price remains indeterminate.

Consider the following statements regarding the simultaneous shift of demand… - NCERT Class 12 Economics MCQ

NCERT Class 12 Economics — Chapter 2: Market Equilibrium

mcqhard

Consider the following statements regarding the simultaneous shift of demand and supply curves:

If demand shifts left and supply shifts left, equilibrium price definitely increases.
If demand shifts left and supply shifts left, equilibrium quantity definitely decreases.
The direction of price change is independent of the relative magnitude of the shifts.

Which of the statements given above is/are correct?

NCERT textbook question

From NCERT Introductory Microeconomics · Page 80

Options

A1, 2 and 3
B1 only
C2 only
D1 and 3 only

Did you get this right?

Solution

The correct option is

2 only

Explanation

When both demand and supply curves shift simultaneously, the effect on equilibrium depends on the direction and relative magnitude of these shifts. However, certain outcomes may still be determinate.

Statement-wise Analysis:

Statement 1 - Incorrect. A leftward shift of both demand and supply reduces equilibrium quantity in all cases, as both forces act to decrease quantity.
Statement 2 - Correct. The effect on equilibrium price is indeterminate when both curves shift left; price may increase, decrease, or remain unchanged depending on the relative magnitude of the shifts.
Statement 3 - Incorrect. The direction of price change is not independent of the relative magnitude of demand and supply shifts.

Key Takeaway: When demand and supply both shift left, equilibrium quantity definitely falls, while the change in equilibrium price remains indeterminate.

Your note

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