Simultaneous Supply-Demand Shifts and Elasticity Effects

Steps:

• A 10% demand decrease shifts the demand curve left, reducing equilibrium price and quantity.
• A 10% supply increase shifts the supply curve right, reducing equilibrium price and increasing equilibrium quantity.
• The combined shift always lowers equilibrium price, as both effects reinforce price reduction.
• Equilibrium quantity rises if the supply curve is steeper (less elastic) than the demand curve, ensuring the supply shift dominates the quantity effect.

Why A is correct:

• In diagram A, the steep supply curve relative to the flatter demand curve means the supply increase outweighs the demand decrease, raising quantity per standard shift analysis.

Why the others are wrong:

• B: Flatter supply curve allows demand decrease to dominate, lowering quantity.
• C: Equal slopes result in indeterminate quantity change, not a definite rise.
• D: Steep demand curve makes supply shift insufficient to raise quantity.

Final answer: A