This is a question with no set answer.
Technically there's no reason not to be the case. Teachers in all professions instruct multiple students, with the expectation that there can be an inherit lack compared to one-on-one instructions, but also with the expectation that the learning potential will never be lower than a standard that allows for purposeful and steady learning.
Most instructors make allowances and deals to best accommodate parents who are considering combined music lessons. But we have to be upfront about expectations and any negatives. We may create an extended session and pricing to compensate for inherent delays, but sometimes kids simply don't act well together. If too silly, distracted or competitive with each other, the lesson is doomed before it began. This is why a free trial lesson is important, especially for these circumstances. Assess, report and plan with the parents on how to go forward - together or separate.
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All in all, most kids do act nicely with each other and have respect for the instructor. Most parents already have an idea that this will be the case before they suggest it. The instructor just needs the right equipment and in the end the right patience and temperment to make combined instruction smooth, fun, as close to a one-on-one as possibile.
Dumming for Kids, Power for Parents!Barry Kaye http://daddoesdrums.com