There can be three scenarios when the demand and supply increase simultaneously. The first scenario is when the increase in demand is more than the increase in supply. The second case is when an increase in demand is equal to the increase in supply. The third case is when an increase in demand is less than the increase in supply.
Case 1: Increase in demand is more than the increase in supply: When the increase in demand is greater than the increase in supply, there is a simultaneous increase in both the equilibrium quantity and equilibrium supply. In the diagram given below, the original equilibrium is attained at point E where the demand curve D intersects with supply curve S. When the demand increases from D to D’ and the supply increases from S to S’, the new equilibrium is attained at E’ with higher equilibrium price and higher equilibrium quantity.
Case 2: Increase in demand is equal to the increase in supply: When the increase in demand is equal to the increase in supply, there is an increase in quantity exchanged at the new equilibrium. However, the price remains the same. In the diagram given below, the original equilibrium is attained at point E where the demand curve D intersects with supply curve S. When the demand increases from D to D’ and the supply increases from S to S’, the new equilibrium is attained at E’ with higher equilibrium quantity and same equilibrium price.
Case 3: Increase in demand is less than the increase in supply: When the increase in demand is less than the increase in supply, there is a decrease in price and an increase in quantity exchanged in the market. The price decreases because the supply exceeds the demand and there is surplus quantity in the market. In the diagram given below, the original equilibrium is attained at point E where the demand curve D intersects with supply curve S. When the demand increases from D to D’ and the supply increases from S to S’, the new equilibrium is attained at E’ with lower equilibrium price and higher equilibrium quantity.
