Syllabus: Cambridge - IGCSE Economics
Module: 2.4 Supply
Lesson: 2.4.2 Price Supply and Quantity
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Introduction
This lesson supports Cambridge IGCSE Economics – Section 2.4.2: Price, Supply and Quantity, part of the broader “Supply” topic in the Cambridge syllabus. It explores how price affects the quantity supplied, using the law of supply as its foundation.
Understanding this concept is not only vital for exam performance, but it also builds commercial awareness by helping students grasp how producers make pricing decisions in real markets. This article provides both syllabus clarity and teaching guidance aligned with real-world application and assessment.
Key Concepts
According to the Cambridge IGCSE Economics syllabus (0455), students must understand the following under 2.4.2: Price, Supply and Quantity:
Law of Supply: As price increases, the quantity supplied increases, and vice versa, assuming ceteris paribus (all other factors constant).
Supply Curve: Upward-sloping to show the direct relationship between price and quantity supplied.
Movement along the Supply Curve: Caused only by a change in price, not other factors.
Distinction between Supply and Quantity Supplied:
Supply refers to the entire relationship between prices and quantity supplied.
Quantity supplied refers to a specific point on the curve at a given price.
Ceteris Paribus: A key assumption that isolates the effect of price.
Real-World Relevance
The law of supply is constantly at work in sectors like agriculture, tech, and energy:
Example 1: Agricultural Goods
When wheat prices rise due to a poor global harvest, farmers are more incentivised to grow and supply more wheat next season, assuming weather and other inputs remain constant.
Example 2: Tech Devices
In the smartphone market, a price increase for a high-demand model (e.g. Apple or Samsung) often encourages producers to ramp up production to meet demand and maximise profit.
Example 3: Energy Market
When wholesale electricity prices spike, energy providers bring additional capacity online (such as stored renewables or standby gas turbines) to meet the surge in profitability.
These examples provide accessible, topical ways to link theory to practice and strengthen students’ commercial literacy.
How It’s Assessed
Cambridge IGCSE Economics assesses this topic in both Paper 1 (Multiple Choice) and Paper 2 (Structured Questions).
Assessment Features:
Command Words: Define, explain, analyse, draw, calculate
Typical Questions:
“Draw and label a supply curve. What does it show?”
“Explain how a change in price causes a movement along the supply curve.”
“Analyse how producers might respond to a rise in market price.”
Assessment Objectives (AOs):
AO1: Knowledge and understanding (definitions, curve drawings)
AO2: Application (using data or case studies)
AO3: Analysis (reasoning behind movements in supply)
AO4: Evaluation (less frequent at IGCSE but may appear in longer responses)
To succeed, students must clearly distinguish between a shift in supply (caused by non-price factors) and a movement along the curve (caused by price changes).
Enterprise Skills Integration
This topic provides an ideal opportunity to develop decision-making and problem-solving skills by placing students in the shoes of producers:
Simulated Decision-Making: Use Enterprise Skills’ business simulation tools where students decide whether to increase output based on market price changes.
Cost-Benefit Analysis: Students weigh up whether the benefit of supplying more units (at a higher price) outweighs increased production costs.
Data-Driven Decisions: Interpreting supply data or graphical trends strengthens their analytical thinking – a skill directly referenced in employer feedback.
These activities support Gatsby Benchmark 4: linking curriculum learning to careers.
Careers Links
Understanding price and supply dynamics supports awareness of several job roles:
| Career Path | Relevance |
|---|---|
| Economist | Analyses how supply reacts to price signals across sectors |
| Supply Chain Analyst | Uses pricing trends to inform stock and logistics decisions |
| Retail Buyer | Considers supplier responsiveness to price when choosing vendors |
| Agricultural Manager | Adjusts production plans based on market pricing forecasts |
| Energy Trader | Makes real-time decisions on supplying electricity to the grid based on price signals |
This module links to Gatsby Benchmark 5 and 6 through simulations, virtual workplace scenarios, and role exploration in the Skills Hub Futures careers programme.
Teaching Notes
Tips for Teaching This Topic:
Start with a Graph: Use a live drawing activity to co-construct the supply curve.
Use Role Play: Have students act as producers deciding whether to supply more units at different price levels.
Clarify Misconceptions:
Students often confuse a “change in supply” with a “change in quantity supplied.”
Reinforce the idea that only price causes movement along the curve, while factors like technology shift the entire curve.
Link to Demand: Eventually overlay the supply and demand curves to show price determination in equilibrium.
Extension Activity:
Use Enterprise Skills’ interactive simulations to have students respond to price changes in real time, adjusting quantity supplied and discussing outcomes with peers. This aligns with active learning methods, which increase comprehension and engagement by over 70% compared to traditional instruction.
