A national retailer sells reusable canvas tote bags online. Two developments happen at around the same time. First, growing environmental awareness means considerably more shoppers want to buy tote bags at every possible price than before. Second, several new overseas factories…

Answer: ((a)) The original equilibrium price is $25, where original quantity demanded (80 hundred, i.e. 8000 tote bags per month) equals original quantity supplied (80 hundred, i.e. 8000 tote bags per month) ((b)) The new equilibrium price is $20, where new quantity demanded (110 hundred, i.e. 11 000 tote bags per month) equals new quantity supplied (110 hundred, i.e. 11 000 tote bags per month) ((c)) Considered alone, the increase in demand (a rightward shift) would raise both equilibrium price and equilibrium quantity, while considered alone, the increase in supply (a rightward shift) would lower equilibrium price and raise equilibrium quantity. Since both shifts push quant…. Part (a): Finding the original equilibrium Equilibrium occurs where original quantity demanded equals original quantity supplied. Checking the table: Price Original Qd Original Qs $10 110 50 $15 100 60 $20 90 70 $25 80 80 $30 70 90 Only at…

IGCSE Economics 0455: Combined Demand and Supply Shifts and the New Equilibrium

Price ($)	Original Qd	New Qd	Original Qs	New Qs
10	110	130	50	90
15	100	120	60	100
20	90	110	70	110
25	80	100	80	120
30	70	90	90	130

Price ($)

Original Qd

New Qd

Original Qs

New Qs

110

130

100

120

100

110

100

120

130

Part (a): Finding the original equilibrium

Equilibrium occurs where original quantity demanded equals original quantity supplied. Checking the table:

Price	Original Qd	Original Qs
$10	110	50
$15	100	60
$20	90	70
$25	80	80
$30	70	90

Only at $25 do the two quantities match, both at 80 hundred tote bags per month (that is, 8000 tote bags per month). This is the original equilibrium, before either development.

Part (b): Finding the new equilibrium

Equilibrium after both developments occurs where new quantity demanded equals new quantity supplied. Checking the table:

Price	New Qd	New Qs
$10	130	90
$15	120	100
$20	110	110
$25	100	120
$30	90	130

Only at $20 do the two quantities match, both at 110 hundred tote bags per month (that is, 11 000 tote bags per month). This is the new equilibrium.

Part (c): Why quantity rises but price falls

It helps to think about the two developments separately before combining them.

Demand increases (environmental awareness): on its own, a rightward shift of demand, with supply unchanged, would raise both equilibrium price and equilibrium quantity.
Supply increases (cheaper overseas manufacturing): on its own, a rightward shift of supply, with demand unchanged, would lower equilibrium price but raise equilibrium quantity.

Effect on quantity: both shifts push equilibrium quantity in the same direction, upward. So when demand and supply increase together, equilibrium quantity is bound to rise, which matches the table: quantity rises from 80 hundred to 110 hundred tote bags per month.

Effect on price: the two shifts pull price in opposite directions, demand pulls it up, supply pulls it down. The overall effect on price therefore depends on which shift is larger. Comparing the columns in the table:

New Qd $-$ Original Qd $= 20$ (hundred) at every price, the demand shift.
New Qs $-$ Original Qs $= 40$ (hundred) at every price, the supply shift.

The supply shift (40) is twice the size of the demand shift (20), so the downward pull on price from the larger increase in supply outweighs the upward pull from the smaller increase in demand. This is why, overall, equilibrium price falls, from $25 to $20, even though demand for tote bags has increased.

Final answers

(a) Original equilibrium: price $=$ $25, quantity $=$ 80 hundred (8000) tote bags per month.
(b) New equilibrium: price $=$ $20, quantity $=$ 110 hundred (11 000) tote bags per month.
(c) Both increases push quantity up, so quantity rises unambiguously; their effects on price are opposite, and since the supply increase (40 per price) is larger than the demand increase (20 per price), the downward pull dominates, so equilibrium price falls overall.