Syllabus: AQA - AS and A Level Economics
Module: 3.1.2 Price Determination in a Competitive market
Lesson: 3.1.2.3 The Determinants of the Supply of Goods and Services

Introduction

This article supports the delivery of AQA AS and A Level Economics, specifically section 3.1.2.3: The determinants of the supply of goods and services. It’s part of the broader microeconomics topic, “Price determination in a competitive market” and builds directly on students’ understanding of supply curves, market equilibrium and economic decision-making.

Aligned with the official AQA syllabus, this lesson is fundamental to helping students grasp how businesses respond to changing conditions — from input prices to government policy. It’s also an opportunity to reinforce quantitative skills, diagram interpretation, and real-world application.

Key Concepts

According to the AQA Economics specification, students should learn:

• The core idea of supply: the quantity of a good or service that producers are willing and able to sell at different prices.

• Positive price relationship: higher prices usually encourage increased supply due to the prospect of higher profits.

• Shifts in the supply curve, not just movements along it. These shifts occur when non-price factors affect supply, such as:

  • Changes in production costs (e.g. wages, raw materials)

  • Technological advances improving efficiency

  • Government interventions: taxes or subsidies

  • Natural factors, like weather or disruptions (e.g. a supply chain shock)

• Diagrammatic analysis: Students must accurately draw and interpret supply curve diagrams showing shifts and movements.

• Supply as dynamic: Emphasise that supply responds to multiple simultaneous influences — both domestic and global.

Real-World Relevance

From global chip shortages to fuel price hikes, supply determinants are everywhere. Some recent examples to explore in class:

• Post-Brexit agricultural supply in the UK: Shifts due to labour shortages and regulation changes.

• Oil production and OPEC decisions: How geopolitical decisions and natural events (e.g. hurricanes disrupting oil fields) can shift global supply curves.

• Electric vehicle (EV) battery supply: A rise in lithium demand has affected supply and pricing of EVs due to finite extraction capacity.

These stories can be turned into discussion prompts or source-based data questions to ground theory in real decisions.

How It’s Assessed

In AQA AS and A Level Economics, this topic appears in Paper 1 (microeconomics). Assessment can include:

• Short-answer questions on causes of supply curve shifts.

• Data response items using real or fictional scenarios.

• Diagram-based application: drawing and interpreting shifts in supply.

• Command words to watch for:

  • Explain: Show cause-effect using theory.

  • Analyse: Build logical chains of reasoning.

  • Evaluate: Judge trade-offs between different causes of a supply shift.

Encourage students to practise writing concise, diagram-backed explanations — a high-value skill across all economics questions.

Enterprise Skills Integration

This topic is perfect for embedding core enterprise capabilities:

• Problem-solving: Analysing why supply might fall for a business and suggesting responses.

• Decision-making: Choosing whether to expand production based on costs or potential profit.

• Commercial awareness: Connecting production decisions with real-world cost pressures and policy changes.

Enterprise Skills Simulations bring this alive. In sessions where students act as business managers, they navigate shifting supply conditions — e.g. facing rising material costs and deciding whether to absorb or pass on price changes.

These sessions reinforce “learning by doing” and help students retain how supply-side decisions affect wider market outcomes.

Careers Links

Understanding supply determinants connects directly to:

• Gatsby Benchmark 4: Linking curriculum learning to careers

• Gatsby Benchmark 5: Encounters with employers (via simulation or case study)

Relevant career paths include:

• Supply Chain Analyst: Using data to improve production and delivery.

• Economist: Advising firms or governments on production trends.

• Operations Manager: Making strategic decisions on output and efficiency.

• Procurement Specialist: Managing cost-effective sourcing of inputs.

Add careers context with tasks like “What would a logistics manager do in this situation?” or “How would this affect a production director’s decision?”

Teaching Notes

Time-saving suggestions for real classrooms:

• Use plug-and-play diagrams to demonstrate curve shifts — avoid redrawing each time. Tools like the Skills Hub provide editable templates.

• Apply dual scenarios: Show supply shifts due to both internal (cost of labour) and external (policy or natural disasters) causes.

• Encourage paired discussion: “Which determinant would most likely cause a leftward shift — and why?”

• Practice “draw then explain” questions to get students comfortable with structure and interpretation.

Common misconceptions to address:

• Confusing a movement along the supply curve with a shift in the curve.

• Believing price is the only supply determinant.

• Overlooking non-obvious influences like subsidies or weather.

Stretch and challenge:

• Investigate supply shocks in global trade.

• Explore elasticity of supply in short vs long run.

• Compare industries with volatile vs stable supply chains.