Syllabus: AQA - GCSE Economics
Module: 3.1.3 How prices are Determined
Lesson: 3.1.3.6 Price Elasticity of Supply

Introduction

This lesson sits within the AQA GCSE Economics specification (8136), under section 3.1.3: How prices are determined, with a specific focus on 3.1.3.6: Price Elasticity of Supply (PES). It introduces students to a critical market mechanism—how suppliers respond to price changes—and why this matters for resource allocation, production planning, and market outcomes.

Understanding PES builds a bridge between abstract economic theory and real-world commercial decision-making, supporting both curriculum mastery and broader workplace readiness. It aligns strongly with Gatsby Benchmark 4 by linking curriculum learning to real careers in logistics, operations, and retail sectors.

Key Concepts

Students studying 3.1.3.6 are expected to:

• Define price elasticity of supply (PES) as the responsiveness of the quantity supplied to a change in price.

• Calculate PES using the formula:

  PES=% change in quantity supplied% change in price\text{PES} = \frac{\%\ \text{change in quantity supplied}}{\%\ \text{change in price}}PES=% change in price% change in quantity supplied​

• Interpret PES values:

  • PES > 1 = Elastic supply

  • PES < 1 = Inelastic supply

  • PES = 1 = Unit elastic supply

• Explain factors influencing PES, including:

  • Spare production capacity

  • Stock levels

  • Production time

  • Ease of switching production

  • Time period considered

• Apply PES to different market scenarios, considering how supply responsiveness affects prices, production, and resource use.

This topic develops students’ ability to link formulae with analytical reasoning and enhances quantitative skills required for the exam.

Real-World Relevance

Price Elasticity of Supply isn’t just a classroom concept—it plays out daily across industries:

• Tech shortages: When chip demand surged during the global semiconductor shortage, suppliers couldn’t respond quickly. Limited spare capacity and long production times made supply highly inelastic—prices soared.

• Agriculture: Supply of fresh produce is often inelastic in the short term due to biological growth cycles. A sudden increase in demand or bad weather can drastically impact prices, with suppliers unable to respond quickly.

• Fast fashion vs handmade goods: A high-street clothing brand with ready stock and flexible manufacturing shows elastic supply, whereas a bespoke tailor making garments to order has inelastic supply.

These examples help students appreciate how PES affects everything from product availability to job opportunities across sectors.

How It’s Assessed

AQA typically assesses this topic through a mix of:

• Multiple-choice questions testing formula understanding and terminology.

• Short-answer questions that ask students to calculate PES or explain its value.

• Data response questions involving charts, tables or real-life scenarios, where students must analyse and interpret supply behaviour.

• Extended responses (4–6 marks) requiring evaluation of supply responsiveness in given markets, often linked to recent events or case studies.

Command words to focus on: calculate, explain, analyse, evaluate. Students should practise interpreting numerical data and applying theory to unfamiliar contexts—both key exam skills.

Enterprise Skills Integration

This lesson ties directly into the Enterprise Skills Thematic Framework, particularly:

• Commercial Awareness: Students learn how organisations make supply-side decisions in dynamic markets.

• Decision-Making & Problem-Solving: Evaluating supply elasticity supports logical thinking about how businesses respond under constraints.

• Workplace Readiness: Understanding PES enables students to consider the operational pressures firms face, from capacity planning to supply chain agility.

By using simulation-based tools or role play (e.g. “You’re a supplier deciding how much to produce”), teachers can foster critical thinking and strategic awareness—skills valued across careers.

Careers Links

This topic aligns with Gatsby Benchmarks 4, 5 and 6:

• Benchmark 4: Demonstrates how core economic concepts underpin job roles such as logistics manager, supply chain analyst, operations planner and stock controller.

• Benchmark 5: Employer case studies and embedded videos (as seen in Skills Hub Futures) bring supply responsiveness to life with sector voices.

• Benchmark 6: Simulated workplace challenges—such as managing stock or reacting to a demand shock—offer meaningful “experiences of the workplace”.

It also prepares students for post-16 routes in:

• Business and management

• Economics and finance

• Retail and distribution

• Manufacturing and production planning

Teaching Notes

Tips for delivery:

• Start with a news story: Use a recent example like oil prices, food shortages, or fashion demand spikes.

• Use active learning: Have students calculate PES for fictional products with different supply constraints.

• Graph work: Ensure confidence with supply curve shifts and elasticity gradient interpretation.

• Cross-curricular links: Bring in maths (percentages, formulae) and geography (global supply chains).

Common pitfalls:

• Confusing PES with price elasticity of demand (PED)

• Misinterpreting PES values (e.g. thinking PES < 1 means “sensitive”)

• Ignoring the time factor in supply responsiveness

Extension ideas:

• Debate: “Should businesses always aim for elastic supply?”

• Project: Map a supply chain for a common product and identify points of inelasticity

• Simulation: Use Skills Hub tools to model how suppliers react to price changes

Assessment strategy:
Use a mix of calculation tasks, short written responses, and applied scenarios. Encourage students to explain why a supply might be elastic or inelastic, not just state it.