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 the quantity of a good or service that producers are willing to sell at different prices, while demand refers to the quantity that consumers are willing to buy. The interaction between supply and demand determines market equilibrium.
Key Concepts
- 1The law of demand states that, all else being equal, as the price of a good decreases, the quantity demanded increases.
- 2The law of supply states that, all else being equal, as the price of a good increases, the quantity supplied increases.
- 3Market equilibrium occurs where the quantity supplied equals the quantity demanded.
- 4Shifts in demand or supply curves can lead to changes in equilibrium price and quantity.
- 5Factors such as consumer preferences, income levels, and the prices of related goods can affect demand, while production costs and technology can affect supply.
Simple Explanation
Supply and demand are like a balancing act in the market. When more people want to buy something (demand), the price usually goes up. Conversely, when sellers are willing to provide more of a product at a higher price (supply), the price can go down. The point where the amount people want to buy matches what sellers want to sell is called equilibrium.
Memory Trick
“Think of 'D' for Demand and 'S' for Supply as two friends holding hands. When one pulls away (shifts), the other must adjust to find balance again, just like in the market.”
Flashcards
What does the law of demand state?
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Exam Questions
Describe and explain the concept of market equilibrium. [6 marks]
6 marksView mark scheme hint▾
Define market equilibrium, explain how it is determined by supply and demand, and discuss factors that can lead to shifts in equilibrium.
Explain how a decrease in consumer income affects the demand for inferior goods. [4 marks]
4 marksView mark scheme hint▾
Define inferior goods, explain the relationship between income and demand for these goods.
What is meant by a shift in the supply curve? [2 marks]
2 marksView mark scheme hint▾
Define a shift in the supply curve and provide an example of a factor that can cause this shift.
Practice Quiz
What happens to demand when the price of a good decreases?
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