OxfordAQA International GCSE Economics: Demand, supply and equilibrium price (9214)

This guide covers sections 3.1.3.1 to 3.1.3.3 of the OxfordAQA International GCSE Economics (9214) specification, for exams from May/June 2025 onwards. This is Paper 1 content (How markets work). Every country, firm and number below is invented for illustration. Intermarket relationships and elasticity are in separate sections of the specification and are not taught here.

Related pages: revision notes, practice questions, the wider How markets work guide, the course hub, the printable checklist and the free diagnostics.

What you must be able to do

Reference	Outcome
3.1.3.1	Meaning of demand; factors that influence it; build an individual demand curve from consumer data; shifts versus movements
3.1.3.2	Meaning of supply; factors that influence it; build a firm’s supply curve from production data; shifts versus movements
3.1.3.3	Equilibrium price from a supply and demand diagram; excess demand and supply; effects of changes; real markets; revenue on a diagram

3.1.3.1 Demand

Demand means the amounts buyers will actually take, with money to pay, at each price during one period. “Able” matters: wanting something without the money for it does not count.

The demand curve slopes downward. Measure price on the upright axis and the amount bought on the flat one. A lower price means more is bought.

Factors that influence demand (other than the good’s own price):

• income, and whether people feel their income is secure
• tastes and fashion, including advertising
• prices of related goods
• population size and age structure
• expectations about future prices or income
• seasons, weather and events

Worked example: an individual demand curve

Meera’s weekly purchases of mango smoothies at one stall (illustrative):

Price (cu)	8	6	5	4	3	2
Quantity	1	2	3	5	7	10

Method:

1. Label the vertical axis price (cu) and the horizontal axis quantity of smoothies per week.
2. Plot each pair as a point: (1, 8), (2, 6), (3, 5), (5, 4), (7, 3), (10, 2).
3. Join the points. The line falls from left to right.

Tariq buys 0, 1, 2, 3, 4 and 6 at the same prices. Market demand is found by adding quantities at each price: 1, 3, 5, 8, 11 and 16. Adding a customer makes the curve lie further right.

Movement or shift?

If only the good’s own price changes, you stay on the same curve. At 5 cu Meera buys 3; if the price falls to 4 cu she buys 5. That is an extension of demand (a contraction for a rise).

A change in any other factor shifts the curve, because quantity changes at every price. Suppose Meera’s income rises and she buys 3 more at each price:

Price (cu)	8	6	5	4	3	2
Old quantity	1	2	3	5	7	10
New quantity	4	5	6	8	10	13

At 5 cu she now buys 6, not 3. The curve has shifted right, which is an increase in demand. A shift left is a decrease in demand.

3.1.3.2 Supply

Supply means the amounts sellers will actually bring to market, covering their costs, at each price during one period. The supply curve slopes upward: a higher price makes it worth producing more, partly because extra output often costs more per unit to make.

Factors that influence supply:

• costs of production (wages, materials, energy, rent)
• technology and productivity
• taxes and subsidies
• the number of firms in the market
• weather and natural events, especially for farm goods
• expectations about future prices

Worked example: a firm’s supply curve from production data

A small bakery (illustrative) records the extra cost of making each additional batch of 100 loaves, ignoring fixed costs:

Total output	100	200	300	400	500
Total variable cost (cu)	60	130	220	340	500
Extra cost of the batch (cu)	60	70	90	120	160
Extra cost per loaf (cu)	0.60	0.70	0.90	1.20	1.60

Rule: the firm adds a batch only if the price per loaf at least covers the extra cost per loaf. So:

Price per loaf (cu)	0.60	0.70	0.90	1.20	1.60
Quantity supplied	100	200	300	400	500

At 1.00 cu the bakery makes 300, because the fourth batch (1.20 per loaf) is not worth making. At 1.20 cu with 400 loaves, revenue is 480 against variable costs of 340, leaving 140 towards fixed costs and profit. Plot price against quantity and join the points to get an upward-sloping curve.

Market supply is the sum of all firms’ supply at each price.

Movement or shift?

When the good’s own price alone changes, supply extends or contracts along the same curve; this is an extension or contraction. Any other factor shifts the curve. Suppose flour costs rise so every batch costs 0.10 cu more per loaf (0.70, 0.80, 1.00, 1.30, 1.70):

Price per loaf (cu)	1.00	1.20	1.60
Old quantity	300	400	500
New quantity	300	300	400

The bakery now supplies less at 1.20 and 1.60 and the same at 1.00, where the old step happened to end exactly: the curve shifts left (a decrease in supply). Lower costs, better technology or a subsidy shift it right (an increase in supply).

3.1.3.3 Equilibrium price

Equilibrium is the price where buyers’ plans and sellers’ plans match, so the amount wanted is exactly the amount offered. Nothing pushes the price either way. Here is a wholesale market for tomato crates in Country A (illustrative), per day:

Price (cu)	Demand	Supply	Position
10	700	200	Excess demand 500
12	600	350	Excess demand 250
14	500	500	Equilibrium
16	400	650	Excess supply 250
18	300	800	Excess supply 500
20	200	950	Excess supply 750

On the diagram, equilibrium is where the demand and supply curves cross: price 14 cu, quantity 500 crates.

Excess demand (a shortage) exists below equilibrium. At 10 cu buyers want 700 but sellers offer 200. Buyers compete, sellers see stock vanish and raise price. As price rises, quantity demanded falls and quantity supplied rises, so the gap closes.

Excess supply (a surplus) exists above equilibrium. At 18 cu sellers offer 800 but buyers want 300. Unsold stock builds, so sellers lower the price. Buyers take more and sellers offer less.

Worked example: changes in equilibrium

Always follow the same chain: which curve shifts, which way, the gap that opens at the starting price, then the new equilibrium.

Demand rises. Incomes rise and buyers want 125 more crates at every price. At 14 cu demand is now 625 against supply of 500, so there is excess demand of 125. Price rises. At 15 cu demand is 575 and supply is 575. New equilibrium: 15 cu and 575 crates. Price is up 1 cu (7.1%) and quantity up 75 crates (15%).

Supply falls. Poor weather cuts supply by 100 crates at every price. Equilibrium becomes 14.8 cu and 460 crates: price up, quantity down.

Supply rises. Better seed adds 100 crates at every price. Equilibrium becomes 13.2 cu and 540 crates: price down, quantity up.

Both curves move. If demand rises by 125 and supply falls by 100, price rises to 15.8 cu, and quantity (535) also rises. If supply falls by 300 instead, price rises to 17.4 cu but quantity falls to 455. Price rises either way. The direction of quantity depends on how large the two shifts are.

Change	Price	Quantity
Demand up	Up	Up
Demand down	Down	Down
Supply up	Down	Up
Supply down	Up	Down

Showing revenue on a diagram

Revenue = price × quantity sold. On the diagram, revenue is the rectangle with corners at the origin, the price on the vertical axis and the quantity on the horizontal axis.

At equilibrium in the tomato market, revenue is 14 × 500 = 7,000 cu. After demand rises, it is 15 × 575 = 8,625 cu, a bigger rectangle. After the poor-weather supply fall it is 14.8 × 460 = 6,808 cu, a smaller one. So revenue can fall even though price rises, because quantity falls too.

A single producer’s revenue works the same way, using its own quantity. A farm selling 40 crates at 14 cu earns 560 cu. At 15 cu, selling 44 crates, it earns 660 cu.

Away from equilibrium, only the smaller of demand and supply is traded. At 10 cu sellers sell 200 crates (revenue 2,000). At 18 cu buyers take 300 (revenue 5,400). Use the quantity actually traded.

Applying the model to real markets

Fixed supply: event tickets. A stadium (illustrative) has 5,000 seats, so supply is a vertical line at 5,000. For an ordinary match, demand is 7,000, 5,000, 3,000 and 1,000 at 20, 30, 40 and 50 cu, so equilibrium is 30 cu. A cup final adds 4,000 to demand at every price (11,000, 9,000, 7,000, 5,000). Equilibrium becomes 50 cu. Revenue rises from 30 × 5,000 = 150,000 cu to 50 × 5,000 = 250,000 cu. Quantity cannot change, so the whole adjustment falls on price.

Farm goods. Harvests vary with weather, so supply shifts unpredictably and prices move sharply from year to year.

Housing and rents. Few new homes can be built quickly, so supply is slow to respond when demand rises.

Evaluating the model. Supply and demand diagrams are most reliable when many buyers and sellers trade near-identical goods. In real markets:

• other factors change at once, so the “only one curve shifts” case is a simplification
• supply may take months or years to respond
• prices may not adjust quickly, for example where contracts fix them
• governments, firms with market power and poor information can all stop the market reaching equilibrium

A strong answer uses the model to give a clear prediction, then states one limit that fits the market in the question.

Common errors

• Drawing a shift when only the good’s own price has changed. Slide along the curve instead.
• Writing “demand increases” when the price fell. Use extension or contraction.
• Showing a price change as a shift of both curves.
• Calculating revenue from the wrong quantity, such as supply at a price above equilibrium.
• Stating a new price or quantity without saying which curve moved and what gap opened at the starting price.
• Saying quantity must rise when both curves shift.

Official syllabus

OxfordAQA International GCSE Economics (9214), specification Version 1.0, first teaching September 2023, first examined May/June 2025. Published by OxfordAQA.