Syllabus: Cambridge - IGCSE Economics
Module: 2.6 Price Changes
Lesson: 2.6.1 Causes of Price Changes

Introduction

This article supports the Cambridge IGCSE Economics syllabus, specifically section 2.6.1 Causes of Price Changes, under Topic 2.6: Price Changes. This section introduces learners to the dynamics of supply and demand and the external and internal factors that influence price fluctuations.

For educators, careers leads and SLT, this topic offers a gateway into understanding real-world economic behaviour while also building transferable skills such as decision-making, analysis and commercial awareness. It directly supports Gatsby Benchmark 4 by linking curriculum content to live economic and business issues.

Key Concepts

Cambridge IGCSE Economics (0455) Topic 2.6.1 requires students to understand the causes of price changes in market economies. The syllabus outlines the following expectations:

• Understand how changes in demand affect price:

  • Factors: income levels, tastes, advertising, substitutes/complements, population changes

• Understand how changes in supply affect price:

  • Factors: costs of production, technology, taxes and subsidies, weather (for agriculture), number of producers

• Interpret shifts in supply and demand curves

• Link real-world changes to market equilibrium adjustments

• Understand that prices allocate resources and act as signals in the market

These concepts underpin much of the broader economic framework and introduce students to the mechanism of price determination — a foundation for advanced study and practical understanding.

Real-World Relevance

Recent global events have provided clear, tangible examples of the causes of price changes. Consider the following:

• Energy prices surged in 2022 due to supply restrictions from geopolitical tensions (e.g. Russia-Ukraine conflict), paired with post-pandemic demand recovery.

• Lettuce prices in the UK spiked in early 2023 due to poor weather in Southern Europe reducing supply, illustrating seasonal and climatic impacts on agricultural products.

• The rapid rise in used car prices during the pandemic was due to a global semiconductor shortage limiting new car production — a supply chain disruption example.

These examples bring theory to life and encourage students to monitor news headlines through an economic lens.

How It’s Assessed

In Cambridge IGCSE Economics exams, this topic typically appears in Paper 1 (Multiple Choice) and Paper 2 (Structured Questions).

Command words to focus on:

• Define: e.g., “Define demand”

• Explain: e.g., “Explain how a change in production costs affects price”

• Analyse: e.g., “Analyse the effect of a rise in demand on equilibrium price”

• Evaluate: e.g., “Discuss whether an increase in supply always leads to lower prices”

Assessment often includes:

• Diagram-based questions requiring shifts in supply/demand curves

• Short explanations of how factors affect price

• Extended responses linking theory to real events (e.g. oil markets, housing)

Teachers should emphasise:

• Clear labelling of diagrams

• Step-by-step logical reasoning

• Integration of real examples where relevant

Enterprise Skills Integration

Understanding price changes directly builds commercial awareness, problem-solving, and decision-making — all critical enterprise skills.

In simulation environments like those on Skills Hub Futures:

• Students act as business owners, adjusting prices based on changing supply costs and consumer demand.

• They must make decisions using incomplete information — reflecting real market uncertainty.

• Price-setting is used as a mechanism for teaching financial literacy and risk management.

Example activity:

In a business simulation, students manage a fictional café. A shortage of coffee beans increases supply costs. They must decide whether to raise prices, switch suppliers, or cut back in other areas. Their decision impacts customer satisfaction and profits.

These exercises align with Benchmark 4 and Benchmark 6, giving students virtual workplace experience with real-world consequences.

Careers Links

Understanding the causes of price changes supports a broad range of career pathways, particularly those in:

• Retail and merchandising – analysing price sensitivity and seasonal changes

• Economics and finance – forecasting market movements

• Supply chain management – responding to cost shocks and disruptions

• Marketing and pricing strategy – adapting to consumer trends and competition

Mapped to Gatsby Benchmarks 4, 5 and 6, this topic offers:

• Career-linked classroom learning

• Employer-aligned simulations

• Real industry case studies in Enterprise Skills platforms

By embedding this topic in a careers-focused framework, students gain insight into how everyday price shifts are core to professional roles across industries.

Teaching Notes

Tips for effective delivery:

• Begin with a price change in a familiar product (e.g. petrol, eggs)

• Use real news articles as warm-up discussions

• Apply supply and demand curve exercises using whiteboards or online tools

• Integrate roleplay where students act as producers and consumers to explore incentives

Common pitfalls to watch for:

• Students confusing movements along a curve with shifts of the curve

• Oversimplifying the impact of one factor when multiple variables are at play

• Neglecting diagram labelling in exams — crucial for full marks

Extension activities:

• Create a class price index where students track weekly prices of common goods

• Debate: “Should the government intervene when prices rise too fast?”

Assessment prep tools:

• Use Skills Hub’s assessment templates mapped to Cambridge Economics

• Incorporate peer-marking with mark schemes to build assessment literacy