Syllabus: SQA - Higher Course Spec Economics
Module: Economics of the Market
Lesson: Theory of Supply

Introduction

The “Theory of Supply” forms a core part of the SQA Higher Economics course under the unit Economics of the Market. It’s not just about curves and costs—it’s about helping learners understand how producers behave, how resources are allocated, and how prices are determined in real-world markets. This section lays the groundwork for understanding economic choices and their consequences, aligning directly with the SQA syllabus on supply, price, and market behaviour.

Key Concepts

Students studying this topic are expected to grasp the following syllabus-aligned concepts:

• Supply Schedules and Curves
  Understand how supply is represented both numerically and graphically. Students should be able to interpret and draw supply curves, showing the direct relationship between price and quantity supplied.

• Law of Supply
  As price rises, quantity supplied typically increases—provided other factors remain unchanged.

• Movement Along the Supply Curve
  Changes in price lead to movements along the supply curve, not shifts.

• Determinants of Supply
  Key factors include:

  • Cost of factors of production

  • Technology

  • Weather or natural conditions

• Shifts in the Supply Curve
  Changes in the determinants cause the whole supply curve to shift, leading to a new quantity being supplied at every price level.

Real-World Relevance

Supply theory comes to life when students can connect it to headlines:

• Agriculture: A drought can significantly reduce the supply of crops, pushing prices up. A bumper harvest does the opposite.

• Technology: When chip production improves, supply increases, making electronics cheaper and more accessible.

• Labour Shortages: A lack of delivery drivers or warehouse staff can reduce the supply of goods reaching shops, even if the product exists.

Consider asking students: Why were gaming consoles so expensive during 2021–2022? This invites a discussion around supply shocks, production delays, and scarcity.

How It’s Assessed

In the SQA Higher Economics exam, students encounter a mix of data response and structured questions that test their ability to apply theory to practical scenarios. For Theory of Supply, typical assessment tasks include:

• Descriptive questions: e.g. “Define and describe the law of supply.”

• Graphical interpretation: Drawing and analysing supply curves and shifts.

• Scenario-based application: Given a real-world context (e.g. a rise in production costs), students explain how the supply curve is affected.

• Command words used include describe, explain, analyse, and evaluate. Understanding what these demand is key to scoring well.

Enterprise Skills Integration

This topic opens the door to a range of enterprise skills:

• Decision-making: Understanding supply helps learners make better business decisions—e.g. when to increase production or change suppliers.

• Problem-solving: Analysing what causes changes in supply sharpens students’ ability to evaluate cause and effect.

• Numeracy and communication: Interpreting supply data and conveying economic reasoning clearly are transferable skills across sectors.

You could run a short task: “You’re a chocolate manufacturer. Cocoa prices have just doubled. What do you do?” This encourages both analytical and entrepreneurial thinking.

Careers Links

Understanding supply isn’t just for economists—it’s relevant across many career pathways:

• Business & Finance: Forecasting supply trends is key to procurement, stock management, and financial planning.

• Agriculture & Environmental Science: Professionals track weather patterns and supply chain impacts.

• Logistics & Operations: Effective supply chain management depends on grasping supply principles.

These links support Gatsby Benchmark 4 (linking curriculum learning to careers) and Benchmark 5 (encounters with employers if case studies or guest speakers are used).

Teaching Notes

Here are some practical tips for teaching this topic:

• Use visual aids: Always introduce the supply curve with simple, relatable examples (e.g. lemonade stands or trainers).

• Contrast movements and shifts: Many learners mix these up. Reinforce the difference with mini whiteboard quizzes or card sort activities.

• Scenario modelling: Use current events to generate class discussions or mock decision-making tasks.

• Common pitfalls:

  • Students confusing supply with stock.

  • Thinking shifts only occur with price changes.

  • Not labelling diagrams properly in assessments.

Extension idea: Link supply to environmental issues. For example, how might climate change affect supply in different industries? This encourages higher-order thinking and relevance beyond the classroom.