Question

How does one analyze a market where both

demand and supply shift?

Short answer

To analyze market we draw both curves based on the law of demand and the law of supply to generate an equilibrium price and quantity to study the shift in the two curves.

Step-by-step solution

Introduction

The demand curve represents the total demand for a given price and the shift is always due to change in income increase. The supply curve shows the minimum price at which a firm is ready to produce its output for ex; a shift in supply when production increases.

Step 2. : Explanation

To analyze the shift in the two curves, we draw both the curves based on the law of demand and the law of supply to achieve an equilibrium price and quantity.

Based on the economic factors we access the shift among the two curves to devise a new equilibrium point. For example; a combined effect of a decrease in demand and decrease in supply causes both price and quantity change. Thus to study the shift based on economic factors we see the intensity of impact on the shift. However, a shift in one curve does not impact the shift in another but a shift in one curve causes a movement along the second curve.