I want to make one more assumption. The supply curve represents all available ad inventory (not single sites). This is why you see certain pages being affected by Panda while others are not in some circumstances. So for example, a single site owner has their ad inventory reduced by 50% during a panda update (these pages are pushed way back in the results) Ad inventory is therefore reduced as an aggregate by Panda.
Again, Panda has quality associated with it, but again I argue it has less importance than what most webmasters place on it.