Edexcel Economics Supply and Demand Revision Notes
Master Edexcel Economics Supply and Demand using simple revision notes, key facts and practice questions — all generated by AI for your exam.
Supply and demand are fundamental concepts in economics that describe how prices are determined in a market. Supply refers to how much of a good or service producers are willing to sell at various prices, while demand refers to how much consumers are willing to buy. The interaction between supply and demand sets the market equilibrium price.
Key Concepts
- 1Supply is the quantity of a good or service that producers are willing to sell at different prices.
- 2Demand is the quantity of a good or service that consumers are willing to buy at different prices.
- 3The law of demand states that, all else being equal, as the price of a good falls, the quantity demanded rises.
- 4The law of supply states that, all else being equal, as the price of a good rises, the quantity supplied rises.
- 5Market equilibrium occurs where the quantity supplied equals the quantity demanded.
Simple Explanation
Supply and demand are like a balancing act in the market. When prices go up, producers want to sell more, but consumers want to buy less. Conversely, when prices go down, consumers want to buy more, but producers want to sell less. The point where the amount supplied equals the amount demanded is called market equilibrium.
Memory Trick
“Think of 'S' for Supply and 'D' for Demand as two friends trying to meet in the middle at a park. They adjust their positions based on each other's movements until they find the perfect spot to meet, just like how supply and demand adjust to find the equilibrium price.”
Flashcards
What is supply?
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Exam Questions
Describe and explain the factors that can cause a shift in the demand curve. [6 marks]
6 marksView mark scheme hint▾
Consider factors like income, consumer preferences, price of substitutes, and complements.
Explain how a change in consumer income affects demand for normal and inferior goods. [4 marks]
4 marksView mark scheme hint▾
Discuss how demand for normal goods increases with income and decreases for inferior goods.
What is meant by 'price elasticity of demand'? [2 marks]
2 marksView mark scheme hint▾
Define the concept and mention how it measures responsiveness of quantity demanded to price changes.
Practice Quiz
What happens to demand when prices increase?
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