Shifts of demand or supply change price
The equilibrium price is set where demand equals supply. A price change happens when the whole curve shifts: an increase in demand (curve shifts right) or a fall in supply (curve shifts left) pushes the equilibrium price up, while a fall in demand or a rise in supply pushes it down. Trace the new intersection to read off the new price and the new quantity.
State the effect on price AND quantity
When demand rises, both the equilibrium price and quantity rise. When supply rises, the equilibrium price falls but quantity rises. So price and quantity move in the same direction after a demand shift, but in opposite directions after a supply shift. Always state what happens to both the price and the quantity, not just one.
Prices signal, incentivise and ration
A price change is a signal that reallocates resources. A rising price signals that a good is scarce relative to demand: it rations it among buyers and gives firms an incentive to supply more, so resources move into that market. A falling price does the reverse, moving resources out. This is how a market economy answers what, how and for whom to produce.
Drawn from real examiner reports.
Movement along vs shift
A price change driven by a condition (incomes, tastes, costs, the price of a related good) shifts the whole curve and creates a new equilibrium. A change in the good's own price is only a movement along the curve. Mixing these up leads students to draw the wrong thing or to explain the wrong cause.
June 2023 Paper 11 (Multiple Choice) Q5: only 44% answered correctly. The report noted that candidates choosing the wrong option confused a movement along a demand curve with a shift of demand — a shift is an increase in demand, whereas a movement along is an extension.
Describe vs analyse the diagram
Saying "the demand curve moves to the right" only describes the diagram. To gain analysis marks you must explain the economic effect: the rightward shift raises the equilibrium price and the equilibrium quantity, and then say why — demand exceeds supply at the old price, so price is bid up until a new equilibrium is reached.
November 2022 Paper 22 (Structured) Q4(c) on rising demand for solar energy: the report stressed that describing the diagram is not the same as analysing it, noting that to say the demand curve moves to the right is insufficient on its own.
Trace knock-on effects on markets
A price change in one market spreads to related markets. If the price of a good rises, demand for its substitute rises (its price and quantity rise too) and demand for its complement falls. Strong answers trace this chain; weaker ones stop at the first market and ignore the link, or fail to use price elasticity of demand when asked about revenue.
June 2023 Paper 22 (Structured) Q4(c): the rise in the price of milk raised demand for the substitute soft drinks, so candidates were expected to trace the effect; the report noted that strong analysis of the impact on milk producers' revenue required the concept of price elasticity of demand.
State BOTH price and quantity
State the effect on both equilibrium price and quantity, and get the directions right. After a demand shift, price and quantity move the same way; after a supply shift, they move opposite ways. Answering only what happens to the price (or only the quantity) throws away marks.
Revenue questions need PED
When a question asks about a firm's revenue after a price change, bring in price elasticity of demand (PED). If demand is inelastic, a price rise raises total revenue; if it is elastic, a price rise lowers total revenue. Assuming a price rise always raises revenue is a common error.
Label the diagram, mark both equilibria
On a price-change diagram, label the axes (price vertical, quantity horizontal), label each curve (D1, D2, S), and clearly mark both the original equilibrium (P1, Q1) and the new one (P2, Q2). Careless labels lose marks even when the economics is sound.
8-mark discuss: two sides + judgement
For the 8-mark discuss, develop a chain of reasoning on both sides and reach a justified judgement rather than listing points. Manage your time so the long part is not rushed after the shorter ones.
Match the command word
Answer to the command word: define (2) = a precise meaning; explain (4) = a developed reason; analyse (6) = a chain of reasoning; discuss (8) = both sides plus a judgement. Answering below the command word's demand caps the mark.
The equilibrium price is the price at which the quantity demanded equals the quantity supplied — the market clears. A price change happens when demand or supply shifts, moving the point where the two curves cross to a new equilibrium.
A shift is caused by a change in a condition, not by the good's own price:
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