AQA GCSE Economics: Demand and supply: factors, curves, shifts and movements (8136) – Revision Notes

These notes condense sections 3.1.3.1 (demand) and 3.1.3.2 (supply) of the AQA GCSE Economics (8136) specification, first taught from September 2017, part of Paper 1, How markets work. The specification has no tiers. Longer explanations and fuller worked examples are in the study guide. When you have revised, try the practice questions, the AQA GCSE Economics hub, the printable checklist and the free 10-minute diagnostics. All names and figures below are invented.

Key definitions

Term	Meaning
Demand	How much consumers are both willing and able to purchase at a price over a stated period
Demand curve	Line showing quantity demanded at each price, other things constant; slopes down
Supply	The amount producers are both willing and able to offer at a price over a stated period
Supply curve	Line showing quantity supplied at each price, other things constant; slopes up
Movement along a curve	Happens when the good’s own price changes and nothing else does
Shift of a curve	Caused by a change in any other factor
Substitute	A good that can replace another
Complement	A good used together with another

Axes and labels

• Price (£) on the upright axis; quantity, with units and a time period, on the base axis.
• Label the curves D and S, and label any new curve D1 or S1.
• Right shift: more at every price. Left shift: less at every price.

Demand: what shifts the curve

Factor	Change	Demand
Income	Rises	Rises for a normal good
Tastes, fashion, advertising	More favourable	Rises
Price of a substitute	Rises	Rises
Price of a complement	Rises	Falls
Number of buyers	Rises	Rises
Season or weather	Suits the product	Rises
Expected future price	Expected to rise	Rises now
Credit	Cheaper or easier	Rises

The specification does not list the factors, so these are the standard ones. Always give the chain: factor, then what buyers do, then which way the curve moves.

Supply: what shifts the curve

Factor	Change	Supply
Costs of production	Rise	Falls
Technology or productivity	Improves	Rises
Tax on production	Rises	Falls
Subsidy	Introduced	Rises
Number of firms	Rises	Rises
Weather (farm goods)	Favourable	Rises
Price of another good the firm could make	Rises	Falls for this good

Method boxes

Constructing a demand curve from consumer data

1. Draw axes with an even scale from zero. Price goes on the upright axis, quantity on the base.
2. Plot each price and quantity pair as a point.
3. Join the points with a ruler, label D, and give the axes labels and units.

Constructing a firm’s supply curve from production data

1. If the data give price and quantity, plot them directly.
2. If the data give the cost of each extra unit, list the prices you want to test. At each price, count the units whose cost is at or below that price. That count is the quantity supplied.
3. Plot the pairs, join them and label S.

Deciding between a shift and a movement

1. Ask: has the price of this good changed?
2. If yes and nothing else has, move along the same curve.
3. If something else has changed, shift the curve and say which way.
4. If both happen, shift first and then read off the new curve at the new price.

Worked reminders

Demand (Sam, bus journeys a week; invented data).

Fare (£)	1	2	3	4
Journeys	18	15	12	9

The fare rises from £2 to £3: quantity demanded falls from 15 to 12. Change = (12 − 15) / 15 × 100 = −20%. This is a contraction, a movement along the curve.

Sam’s income then falls and he takes 3 fewer journeys at every fare: 15, 12, 9, 6. The curve has shifted left. At £3 demand falls from 12 to 9, which is (9 − 12) / 12 × 100 = −25%.

Supply (a market stall making mugs; invented data). The cost of making each extra mug is £4, £5, £7, £10 and £14. At a price of £7 the stall makes every mug costing £7 or less: 3 mugs. At £14 it makes 5. A rise in the price of clay adds £2 to each mug, so the costs become £6, £7, £9, £12 and £16. At £7 the stall now makes 2 mugs, a fall of (2 − 3) / 3 × 100 = −33.3%. At £14 it makes 4 instead of 5. The curve has shifted left.

Subsidy (the same stall). The government pays £2 on each mug made, so the stall’s effective costs fall to £2, £3, £5, £8 and £12. At £8 it now makes 4 mugs, where before the subsidy it made 3 (costs of £4, £5 and £7). The stall supplies more at the same price, so the curve has shifted right, or down by £2.

Market demand. Two buyers want 7 and 4 items at £5. Market demand at £5 is 7 + 4 = 11. Add the quantities at each price to build the market curve.

Chains of reasoning to learn

Examiners reward the link between cause and effect. Learn these in the form “cause, then buyer or firm behaviour, then curve”.

• Incomes rise, so households can afford more of a normal good, so demand shifts right.
• The price of a complement rises, so buyers use less of the pair, so demand for this good shifts left.
• Advertising makes a product fashionable, so more people want it at each price, so demand shifts right.
• Wages rise, so the cost of each unit rises, so firms make less profit at each price and supply shifts left.
• A better machine cuts the cost per unit, so firms can profitably make more at each price, so supply shifts right.
• A good harvest raises the amount of a crop that farmers can supply at each price, so supply shifts right.
• The good’s own price rises, so buyers switch or cut back and firms want to sell more, so we move up both curves. Neither curve shifts.

Must-know distinctions

Pair	Difference
Quantity demanded vs demand	Quantity demanded responds to the good’s own price (movement). Demand responds to other factors (shift).
Extension vs increase	An extension of quantity demanded is a move down the curve after a price fall. An increase in demand is a shift right.
Contraction vs decrease	A contraction is a move up the curve after a price rise. A decrease in demand is a shift left.
Substitute vs complement	Substitutes compete; complements are used together.
Individual vs market curve	A market curve adds the quantities of all buyers or sellers at each price.
Want vs demand	A want becomes demand only when backed by ability to pay.

Quick self-test

1. Define demand in your own words.
2. On a demand diagram, does price go on the horizontal or the vertical axis?
3. The price of butter rises. State the effect on the demand for margarine, a substitute, and explain why.
4. A heatwave raises ice-cream sales at every price. Is this a movement or a shift?
5. A shop has two customers. At £5 one buys 6 items and the other buys 9. State market demand at £5.
6. Using the mug costs above (£4, £5, £7, £10, £14), how many mugs are supplied at £10?
7. After the clay price rise (costs £6, £7, £9, £12, £16), how many mugs are supplied at £10?
8. The government starts paying firms a subsidy on each unit made. In which direction does the supply curve move?
9. Name two factors that shift the supply curve.
10. The price of a good falls and no other factor changes. State what happens to quantity demanded and name the type of change.

Answers

1. How much consumers are both willing and able to purchase at a price over a stated period.
2. The vertical (upright) axis.
3. Demand for margarine rises (shifts right), because buyers switch to the cheaper substitute.
4. A shift (right), because the cause is the weather, not the price.
5. 6 + 9 = 15 items.
6. Costs of £10 or less: 4, 5, 7, 10. Supply is 4 mugs.
7. Costs of £10 or less: 6, 7, 9. Supply is 3 mugs.
8. To the right, because costs per unit fall.
9. Any two of: costs of production, technology, taxes, subsidies, number of firms, weather.
10. Quantity demanded rises: an extension, a movement down the same curve.

Where marks are usually lost

• Using the word “demand” for a price change, where the correct term is “quantity demanded”.
• Shifting the curve after a change in the good’s own price.
• Drawing a curve and not labelling the axes, the units or the curve itself.
• Giving the factor but no chain, such as “costs rise” with no effect on supply.
• Mixing up substitutes and complements, so the direction of the shift is wrong.
• Using “up” or “down” for a shift without saying which curve and which direction.
• Plotting price on the horizontal axis.
• Reading the wrong row of a table, or counting a unit whose cost is above the price.
• Giving a percentage change against the new figure instead of the starting figure.

Official syllabus

This page follows the AQA GCSE Economics (8136) specification for first teaching in 2017, published by AQA, sections 3.1.3.1 and 3.1.3.2. Check the current specification at aqa.org.uk/8136.