Syllabus: AQA - GCSE Economics
Module: How Markets Work
Lesson: 3.1.3 How Prices Are Determined

Introduction

This lesson aligns directly with the AQA GCSE Economics specification under section 3.1.3: How prices are determined. It’s a cornerstone of microeconomic understanding, equipping students to analyse how supply and demand interact to shape market prices. This topic not only builds core conceptual understanding but provides a robust platform for exploring real-world applications — from inflation and housing crises to supermarket pricing strategies. Perfectly placed for helping students connect economic theory to the news they scroll through every day.

Key Concepts

According to the AQA specification, students should be able to:

• Explain how demand and supply interact to determine market price and quantity traded.

• Understand and draw demand and supply curves, showing shifts and movements along them.

• Analyse the concept of equilibrium — the point at which supply equals demand.

• Identify what causes excess demand and excess supply, and how market forces naturally adjust these imbalances.

• Use price elasticity of demand and supply to understand the responsiveness of quantity to price changes.

• Apply real-world examples to demonstrate how changes in one market may influence others through interrelationships.

These are not just static diagrams — they’re analytical tools students can apply to unpack anything from rising concert ticket prices to the latest news on petrol shortages.

Real-World Relevance

The UK energy price spike in 2022 is a textbook case: supply chain issues and war-related disruptions decreased supply, while cold weather maintained high demand. The result? Higher prices — and national headlines.

Similarly, the housing market consistently offers teachable moments. For example, when mortgage rates rise, demand for housing may dip, shifting the equilibrium and affecting both price and quantity.

You can also bring in micro-examples students relate to: the price of Freddos over time, Black Friday demand spikes, or why local coffee shops may struggle when a Costa opens nearby.

How It’s Assessed

In AQA GCSE Economics, students are expected to:

• Interpret and construct diagrams: Supply and demand curves, showing movements and shifts.

• Analyse changes in price and quantity using real-world or data-based scenarios.

• Explain and evaluate economic decisions using key terminology and structured argumentation.

Typical question types include:

• Multiple-choice on definitions or diagram-based scenarios.

• Short-answer questions explaining causes of shifts in supply/demand.

• Longer analysis or data response questions — for example, evaluating why concert ticket prices increased or the effects of government-imposed price caps.

Command words to prep for: Explain, Analyse, Evaluate, Draw, Calculate.

Enterprise Skills Integration

This topic lends itself perfectly to building core enterprise skills:

• Problem solving: Analysing how markets correct themselves in disequilibrium.

• Decision making: Using supply and demand models to make informed business or consumer decisions.

• Data literacy: Reading graphs, calculating changes, and making conclusions.

• Communication: Justifying pricing decisions from the perspective of different economic agents.

You can easily scaffold this with Enterprise Skills tools like MarketScope AI for live demand-trend analysis or supply-side simulation challenges.

Careers Links

Understanding how prices are determined underpins countless careers. This content supports:

• Gatsby Benchmark 4: Linking curriculum learning to careers.

• Gatsby Benchmark 5: Encounters with employers — e.g. inviting a retail manager to explain pricing decisions.

• Gatsby Benchmark 6: Real workplace insight — pricing in logistics, marketing, or production roles.

Career-relevant roles include:

• Retail analyst

• Procurement manager

• Business consultant

• Policy advisor

• Entrepreneur or small business owner

It also builds foundational thinking for A-Level Economics and Business, apprenticeships in finance or supply chain, and wider employability.

Teaching Notes

Top tips:

• Start with something students know — “Why did that new game console sell out so fast?” — and map the logic with supply/demand diagrams.

• Bring in live news or social trends — think TikTok-influenced product shortages.

• Make space for debate: “Should government intervene when prices spike?”

Common pitfalls:

• Confusing shifts with movements along the curves — visual aids help.

• Overcomplicating elasticity too early — keep numbers simple and link to real choices (e.g. “Would you still buy it if it doubled in price?”).

• Assuming market equilibrium is ‘fair’ — open discussion on inequality and accessibility sharpens critical thinking.

Extension ideas:

• Use case studies from Pitch Deck Analyser to explore how startups price their products.

• Pair with Business Studies content on revenue and break-even to show cross-subject links.

• Run a pricing simulation: let students play ‘sellers’ adjusting prices based on demand feedback.