Simultaneous Shifts in Demand and Supply

Steps:

• Initial equilibrium H occurs at the intersection of original demand (D1) and supply (S1) curves.
• New equilibrium K requires higher quantity and unchanged or slightly higher price, indicating rightward shifts in both curves.
• Increasing demand shifts D1 right to D2, raising both price and quantity.
• Increasing supply shifts S1 right to S2, lowering price but raising quantity more.
• Combined shifts result in higher equilibrium quantity at K, with price effect depending on shift sizes.

Why A is correct:

• Per supply-demand model, simultaneous rightward shifts in both curves unambiguously increase equilibrium quantity while price change is indeterminate, matching shift from H to K.

Why the others are wrong:

• B: Demand increase raises price/quantity; supply decrease raises price further but lowers quantity—net lower quantity.
• C: Demand decrease lowers price/quantity; supply increase lowers price further but raises quantity—net lower price.
• D: Both decreases shift curves left, lowering both price and quantity.

Final answer: A