Cambridge IGCSE Economics: Demand and supply: curves, movements and shifts (0455) – Revision Notes

These notes condense sections 2.3 (Demand) and 2.4 (Supply) of the 2026 Cambridge IGCSE Economics (0455) syllabus, which is not tiered. The study guide has the full explanations. Then try the practice set and the free diagnostics. Also useful: allocation of resources revision notes, allocation of resources practice, the course hub at Cambridge IGCSE Economics and the printable checklist. All figures are invented, and prices are in currency units (cu).

Definitions

Term	Meaning
Demand	How much consumers are ready and able to buy at each price in a stated period
Supply	How much producers are ready and able to sell at each price in a stated period
Demand curve	Downward-sloping line, with price up the side and quantity along the bottom
Supply curve	Upward-sloping line on the same axes
Individual demand or supply	One buyer or one firm
Market demand or supply	All buyers or all firms, found by aggregation
Aggregation	Adding quantities at each price (a horizontal sum)
Condition of demand or supply	A non-price influence that shifts the curve

The syllabus gives extension, contraction, increase and decrease as examples of terminology. It does not print a fixed list of conditions, so the lists below are the standard ones.

Drawing a diagram: steps

1. Draw two axes. Label the vertical axis “Price” and the horizontal axis “Quantity”.
2. Plot the points from the schedule, or sketch the line.
3. Label the curve D (slopes down) or S (slopes up).
4. For a shift, draw the new curve and label it D1 or S1 beside the original D0 or S0.
5. Add an arrow or word to show the direction of the shift.
6. For a movement, mark two points on the same curve and show the price and quantity change.

Movement or shift

	Movement	Shift
Cause	Change in the good’s own price	Change in any other condition
Curve	Stays put	Moves left or right
Demand terms	Extension (price falls), contraction (price rises)	Increase (right), decrease (left)
Supply terms	Extension (price rises), contraction (price falls)	Increase (right), decrease (left)

Memory aid: for demand, extension goes with a price fall. For supply, extension goes with a price rise. Both are “more quantity”.

Conditions of demand

Change	Effect on demand
Income rises, normal good	Increase
Income rises, inferior good	Decrease
Price of a substitute rises	Increase
Price of a substitute falls	Decrease
Price of a complement rises	Decrease
Tastes or advertising favour the good	Increase
Population or number of buyers rises	Increase
Expectation of higher future prices	Increase now
Season or weather suits the good	Increase

Conditions of supply

Change	Effect on supply
Costs of production fall	Increase
Costs of production rise	Decrease
Better technology	Increase
More firms	Increase
Indirect tax imposed or raised	Decrease
Subsidy granted or raised	Increase
Good harvest	Increase
Poor harvest, flood or drought	Decrease
Other goods become more profitable to make	Decrease

Worked reminders

Movement (demand). Market demand for bus journeys in City B (illustrative):

Price (cu)	2	3	4	5	6
Quantity demanded	60	50	40	30	20

The price falls from 6 cu to 3 cu. Quantity demanded rises from 20 to 50, an extension of 30. Percentage change = (50 − 20)/20 × 100 = +150%. If the price rises from 3 cu to 6 cu: (20 − 50)/50 × 100 = −60%, a contraction.

Shift (demand). A fall in the price of rival taxis cuts demand by 30% at every price. New quantities: 42, 35, 28, 21, 14. The curve shifts left. This is a decrease in demand, not a contraction.

Aggregation (demand). 120 identical households each buy 4 journeys at 3 cu, so market quantity is 480. The population grows by 25% to 150 households. New market quantity = 150 × 4 = 600. That is 120 more, or (600 − 480)/480 × 100 = 25%. Demand increases.

Movement (supply). A tea estate’s supply (illustrative):

Price (cu)	2	3	4	5	6
Quantity supplied	0	20	40	60	80

The price rises from 4 cu to 6 cu. Supply extends from 40 to 80: (80 − 40)/40 × 100 = +100%.

Shift (supply, cost fall). Cheaper fertiliser raises supply by 20 at every price: 20, 40, 60, 80, 100. The curve shifts right.

Shift (supply, tax). A tax of 2 cu per unit means the estate keeps only the price minus 2 cu. Quantity at 5 cu is the old quantity at 3 cu: 20. Quantity at 6 cu is 40. Quantity at 4 cu or below is 0. Each point sits 2 cu higher, so the curve shifts up and left. A subsidy of 2 cu does the reverse: 40 at 2 cu, 60 at 3 cu and 80 at 4 cu.

Aggregation (supply). 8 identical farms each supply 50 kg at a given price, so market supply is 400 kg. Two more farms enter. Market supply is 10 × 50 = 500 kg, a rise of (500 − 400)/400 × 100 = 25%. Supply increases.

Must-know distinctions

• Quantity demanded (a point on the curve) versus demand (the whole curve).
• Extension and contraction (movement) versus increase and decrease (shift).
• A rise in price lowers quantity demanded but raises quantity supplied.
• Substitute (rival) versus complement (used together).
• Normal good versus inferior good: income rises, demand rises for one and falls for the other.
• A tax moves the supply curve left. A subsidy moves it right.
• Individual versus market: sum the quantities, never the prices.

Reasoning and analysis

• Why demand slopes down: a higher price makes the good dearer than alternatives and cuts what buyers can afford, so they buy less.
• Why supply slopes up: a higher price brings more revenue per unit, so selling more is more profitable and new sellers are drawn in.
• Chain for a shift: condition changes, so buyers (or sellers) want more or less at every price, so the curve moves, so the quantity at each price is different.
• Two things at once: if one condition raises demand and another lowers it, the net effect depends on their size. Say so.
• Time: supply of crops cannot respond quickly, because planting and growing take time.
• Product type: higher income lifts demand for a normal good but lowers it for an inferior good.

Quick self-test

1. Define supply.
2. The price of tea falls. State the term for the change in the demand for tea itself.
3. Name the term for a rise in income that moves the demand curve for a normal good to the right.
4. Three buyers demand 30, 45 and 25 units at one price. Calculate market demand.
5. One of those buyers demands 45 of the 100 units. Calculate that buyer’s share of market demand.
6. After a shift, supply at a given price rises from 80 to 100. Calculate the percentage change and name the shift.
7. Quantity supplied falls from 100 to 80 as price falls. Calculate the percentage change and name the movement.
8. State the effect on the supply curve of a new indirect tax.
9. The price of cars rises. State the effect on the demand for petrol, giving the term.
10. Is a rise in wages for a bakery’s workers a movement or a shift? Say in which direction.
11. 120 identical households each buy 4 units, and their number grows by 25%. State the new market quantity.

Answers

1. How much of a good or service producers are ready and able to sell at each price in a stated period.
2. Extension of demand (quantity demanded rises). The curve does not move.
3. An increase in demand.
4. 30 + 45 + 25 = 100 units.
5. 45/100 × 100 = 45%.
6. (100 − 80)/80 × 100 = 25%. This is an increase in supply.
7. (80 − 100)/100 × 100 = −20%, a contraction of supply.
8. It shifts left (equivalently, upwards): a decrease in supply, because costs rise.
9. Cars and petrol are complements, so demand for petrol decreases (the curve shifts left).
10. A shift of the supply curve to the left: a decrease in supply, since costs of production rise.
11. 150 households × 4 = 600 units.

Where marks are usually lost

• Writing “demand increases” when the question describes a price fall. That is an extension.
• Answering a movement question by drawing a second curve.
• Leaving off axis labels or curve labels, or putting price on the horizontal axis.
• Forgetting that price on a diagram is the good’s own price. Other prices are conditions.
• Treating a tax as an increase in supply. A tax raises costs, so it decreases supply.
• Adding prices when aggregating, or adding only some of the columns.
• Giving a cause with no chain: “income rises so demand shifts” is thinner than “income rises, buyers can afford more at each price, so demand increases”.
• Forgetting to give the direction of the shift (left or right) or the term (increase or decrease).
• Percentage changes calculated from the wrong starting value. Divide by the original quantity.

Official syllabus

Syllabus document: Cambridge IGCSE Economics (0455), examination in 2026, version 2, sections 2.3 and 2.4. Publisher: Cambridge University Press & Assessment (Cambridge International Education).