Simultaneous Shifts in Demand and Supply Curves

Steps:

• Decrease in demand shifts D curve left, lowering equilibrium price and quantity.
• Increase in supply shifts S curve right, lowering equilibrium price and raising quantity.
• Combined, price always falls due to reinforcing effects on price.
• Quantity rises if supply shift dominates, which occurs when supply is relatively elastic compared to demand.

Why A is correct:

• Diagram A shows flatter supply curve (elastic supply) and steeper demand curve (inelastic demand), so 10% supply increase outweighs 10% demand decrease, raising quantity per elasticity rules.

Why the others are wrong:

• B: Steeper supply (inelastic) means supply shift has smaller quantity effect, so net quantity may not rise.
• C: Equal slopes mean ambiguous net quantity change with equal percentage shifts.
• D: Flatter demand (elastic) allows demand decrease to dominate, potentially lowering quantity.

Final answer: A