messages causes lower quantity demanded of postal services at every given price, causing the demand curve
for postal services to shift to the left, from D0 to D1.

Step 4. Compare the new equilibrium price and quantity to the original equilibrium price. The new equilibrium
(E2) occurs at a lower quantity and a lower price than the original equilibrium (E0).

The final step in a scenario where both supply and demand shift is to combine the two individual analyses to

determine what happens to the equilibrium quantity and price. Graphically, we superimpose the previous two

diagrams one on top of the other, as in Figure 3.19.

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3.3 • Changes in Equilibrium Price and Quantity: The Four-Step Process 69

FIGURE 3.19 Combined Effect of Decreased Demand and Decreased Supply Supply and demand shifts cause

changes in equilibrium price and quantity.

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