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

Introduction

This lesson focuses on Section 1.2.4 of the Pearson Edexcel A Level Economics A specification: Supply, part of Theme 1, How Markets Work. It explores the mechanics behind how firms respond to changes in market conditions and how these responses affect price and output. For teachers, this is a great unit for building strong conceptual understanding and providing students with the analytical tools they’ll need throughout their economic studies. The topic is foundational, syllabus-aligned, and sets the groundwork for elasticity and market equilibrium.

Key Concepts

From the official Pearson A Level Economics A specification, students need to understand:

• Movements along a supply curve: Caused by a change in the price of the good or service.

• Shifts of the supply curve: Triggered by changes in the conditions of supply, such as:

  • Costs of production

  • Technological improvements

  • Changes in indirect taxes or subsidies

  • Natural conditions (e.g. weather, disasters)

• Distinguishing between movements and shifts: This helps students differentiate between internal (price) and external (non-price) factors affecting supply.

Teaching tip: Encourage students to sketch supply curves frequently to show these changes visually and confidently.

Real-World Relevance

Supply shifts are everywhere in the news, making them ideal for bringing theory to life:

• Energy markets: Increases in oil supply by OPEC or disruptions from geopolitical events often shift global supply curves, affecting prices.

• Agricultural supply: Weather patterns like droughts or floods cause shifts in crop yields. The 2022 UK heatwave, for example, affected wheat production, increasing prices due to reduced supply.

• Tech sector: Advances in production methods (like automation in electric vehicle manufacturing) lower unit costs, shifting supply outward and reducing prices over time.

Mini case study suggestion: Have students explore the impact of semiconductor shortages on the supply of electronics and cars.

How It’s Assessed

In Pearson Edexcel A Level Economics, this content is most likely assessed in Paper 1 (Microeconomics) and may feature in Paper 3 (synoptic). Students can expect:

• Short-answer and calculation-based questions: Often test definitions, curve drawing, and diagram interpretation.

• Data response questions: Require application of supply theory to real-world contexts.

• Essay questions: May ask students to evaluate the impact of changing supply conditions on price and output.

Key command words:

• Explain: Define supply, describe what causes shifts, use diagrams.

• Analyse: Link causes of shifts to market outcomes.

• Evaluate: Assess impacts on stakeholders like consumers, firms, or governments.

Enterprise Skills Integration

This topic is a natural fit for building enterprise skills, especially:

• Problem-solving: Students assess the impact of supply shocks and propose possible market or policy responses.

• Decision-making: Understanding how firms respond to cost changes can be linked to managerial decisions in real-world businesses.

• Data interpretation: Diagrams and economic data encourage analytical thinking—a skill directly transferable to real-life decision-making.

Classroom extension: Use mock boardroom scenarios where students role-play as firm managers deciding how to respond to a change in production costs.

Careers Links

This topic links closely with several careers and Gatsby Benchmark outcomes:

• Economics and business analysts: Need to understand market dynamics.

• Supply chain managers: Must adapt to shifts in supply, especially during crises.

• Policy advisors and civil servants: Analyse supply shocks (e.g. housing or food) to craft informed regulation.

• Entrepreneurs: Apply supply logic when pricing goods or scaling production.

Gatsby Benchmarks 4, 5, and 6 are met through:

• Explicit curriculum links to real job roles

• Encounters with real-world economic data

• Opportunities to reflect on employability skills like forecasting, resilience, and strategic thinking.

Teaching Notes

What works well:

• Use real-time news stories to anchor supply shifts in live examples.

• Diagrams are key—have students practice interpreting and sketching them under timed conditions.

• Group activities around “shock events” (e.g. sudden tax changes, weather disruptions) foster critical thinking.

Common pitfalls:

• Students often confuse movements along the curve with shifts—spend time reinforcing this difference.

• Lack of context in longer answers—encourage students to always frame supply changes with a real or hypothetical market.

Extension ideas:

• Link this topic to elasticity of supply (1.2.5) for stretch learners.

• Run a debate on whether governments should subsidise specific industries to boost supply.