The Using the Theory section of this chapter points out that when we observe an increase in both price and quantity, we know that the demand curve must have shifted rightward. However, we cannot rule a shift in the supply curve as well. Prove this by drawing a supply and demand graph for each of the following cases:

a. Demand curve shifts rightward, supply curve shifts leftward, equilibrium price and quantity both rise.

b. Demand and supply curves both shift rightward, equilibrium price and quantity both rise.

c. Evaluate the following statement: “During the oil price spike from 2007 to mid-2008, we know the supply curve could not have shifted leftward, because quantity supplied rose.” True or False? Explain.

d. “During the oil price spike from 2007 to mid-2008, the supply curve may have shifted leftward (say, because a rise in expected price), but the demand curve must have shifted rightward as well.” True of False? Explain.