Syllabus: Pearson - AS Level Economics
Module: 1.2 How Markets Work
Lesson: 1.2.4 Supply

Introduction

This lesson aligns with the Pearson Edexcel AS Level Economics A specification, specifically Theme 1: Introduction to markets and market failure. Topic 1.2.4 explores the concept of supply, forming part of the core framework students use to understand market dynamics.

Understanding supply is essential for interpreting how markets allocate resources, determine prices, and respond to real-world pressures. It supports the development of students’ analytical thinking and directly feeds into their ability to evaluate real economic scenarios, a skill assessed throughout the course.

Key Concepts

In line with the specification, students need to learn:

• The difference between movements along a supply curve and shifts of a supply curve

• How price changes lead to movements along the curve

• The key conditions of supply that cause shifts, including:

  • Changes in costs of production

  • Technological innovations

  • Taxes and subsidies

  • Natural factors (e.g. weather or natural disasters)

• How to draw and interpret supply curves accurately

• How supply interacts with demand to form equilibrium price and quantity

These concepts lay the groundwork for understanding elasticity, price mechanisms, and market outcomes, which follow in the broader Theme 1 sequence.

Real-World Relevance

A recent example of shifting supply occurred in global energy markets. During the Ukraine conflict, natural gas supply from Russia to Europe was drastically cut. This non-price determinant led to a significant leftward shift in the supply curve, raising gas prices across the continent.

Another relatable case for students: the global chip shortage during the COVID-19 pandemic. Supply chains were disrupted, and the supply of semiconductors couldn’t keep up with demand, pushing prices up for products from phones to cars.

These real-world cases help students understand the implications of supply-side changes beyond theory, reinforcing the importance of non-price factors.

How It’s Assessed

Students can expect to be assessed through a range of question types:

• Data response questions using real economic contexts

• Diagram-based questions that require drawing and interpreting supply curves and shifts

• Short-answer questions testing definitions and conceptual clarity

• Extended writing tasks where they apply and evaluate supply theory in context

Command words like “explain,” “analyse,” and “evaluate” are key. Diagrams are often expected, particularly when showing shifts in supply or the interaction with demand. Emphasis is placed on applying knowledge to unfamiliar scenarios.

Enterprise Skills Integration

The topic of supply naturally supports several enterprise skills:

• Problem-solving: Evaluating how firms respond to supply shocks

• Decision-making: Analysing how businesses adapt to changes in input costs or taxes

• Numeracy: Working with diagrams and applying quantitative reasoning

• Adaptability: Understanding how businesses shift strategies in response to external factors

Simulations and case-based tasks (e.g. “What should a farm do when fuel costs double?”) are powerful ways to integrate these enterprise skills in lessons.

Careers Links

This topic ties directly to multiple careers and Gatsby Benchmarks:

• Gatsby Benchmark 4: By linking curriculum to the real labour market, e.g. logistics or production planning

• Gatsby Benchmark 5: Through employer engagement scenarios like supply chain challenges

• Roles that benefit from this knowledge include:

  • Supply chain analysts

  • Operations managers

  • Economic consultants

  • Agricultural economists

  • Public sector analysts (e.g. in policy or environmental impact)

Understanding supply equips students with a lens to analyse how industries respond to changing conditions — an essential skill in many roles.

Teaching Notes

Common pitfalls:

• Confusing movements along the curve (caused by price) with shifts of the curve (caused by non-price factors)

• Not labelling axes or equilibrium points correctly in diagrams

• Overlooking indirect supply factors like regulation or natural events

Teaching tips:

• Use live examples (like oil, housing, or food) to anchor theory in reality

• Encourage students to compare short-run vs long-run supply responsiveness

• Include quick sketch tasks regularly — confidence with diagrams helps under exam pressure