Syllabus: Pearson Edexcel AS Business
Module: The Market
Lesson: 1.2.2 Supply

Introduction

This Pearson Edexcel AS Business lesson on Supply (1.2.2) is part of the “Marketing and People” theme and builds on students’ understanding of how markets operate. It focuses on how supply responds to changes in factors like production costs, technology, and taxation. The lesson sits at the core of market analysis and pricing strategy, helping students link theory to what actually drives business decisions.

It aligns with Assessment Objective 1 (AO1) – demonstrating knowledge, and AO2 (AO2) – applying knowledge to contexts, especially when paired with demand and equilibrium concepts.

Key Concepts

The syllabus outlines several key learnings for 1.2.2 Supply​:

• Definition of Supply: The quantity of a good or service that producers are willing and able to sell at a given price over a period of time.
• Determinants of Supply:
  • Production costs: Lower costs (e.g. cheaper raw materials or wages) lead to increased supply.
  • Technology: Advances generally increase productivity and supply.
  • Taxes and subsidies: Taxes decrease supply (due to increased costs), while subsidies increase it.
  • External shocks: Natural disasters, political unrest, or global supply chain issues can disrupt or increase supply.
• Supply Curve: An upward-sloping curve showing the direct relationship between price and quantity supplied.
• Shifts vs Movements:
  • Movement along the supply curve: caused by a change in price.
  • Shift of the supply curve: caused by non-price factors (e.g. tech improvements, cost changes).
• Interaction with Demand: Understanding supply in isolation is key, but it’s most powerful when analysed alongside demand to explain equilibrium pricing.

Suggested Diagram:

• Standard supply curve
• Supply curve shifting right/left due to external factors

Real-World Relevance

Understanding supply isn’t abstract – it’s fundamental to explaining headlines:

• Energy markets: UK energy prices spiked due to supply constraints from the Russia–Ukraine conflict and rising global gas prices – a real-time example of supply curve shifts.
• Supermarkets and supply chains: During the COVID pandemic, supermarket shelves were cleared not because of demand alone, but because supply couldn’t respond quickly enough to disruptions.
• Tech sector: In 2023, Apple scaled back iPhone production forecasts due to component shortages – a case of supply-side shock directly affecting price and availability.

These are the kinds of examples students see and feel in their lives – anchoring theory in lived reality.

How It’s Assessed

This content appears across both Paper 1 (Marketing and People) and sometimes in Paper 2, especially when combined with elasticity or demand content.

Common command words:

• “Explain” – e.g. “Explain one reason why a business might reduce supply.”
• “Analyse” – e.g. “Analyse how an increase in labour costs could affect supply.”
• “Evaluate” – e.g. “Evaluate the impact of a government subsidy on the supply of electric vehicles.”

Assessment Tips:

• Emphasise the difference between movement and shift – a frequent confusion in student answers.
• Use supply diagrams to show the impact of non-price factors.
• Contextualise answers – supply responses vary between industries.

Enterprise Skills Integration

The supply topic links neatly to core enterprise skills:

• Problem-solving: Students explore how businesses adapt to supply-side challenges (e.g. shortages, cost increases).
• Decision-making: How firms decide whether to increase output, invest in new tech, or respond to government subsidies.
• Adaptability: Understanding that supply isn’t static – businesses have to pivot when costs rise or inputs become scarce.

Tool spotlight: MarketScope AI can be used to simulate how a shock (e.g. a new tax) affects supply and equilibrium price, allowing students to explore scenarios and build commercial awareness.

Careers Links

This lesson is highly relevant to multiple roles:

• Operations Manager: Constantly monitors production costs and adjusts output levels accordingly.
• Supply Chain Analyst: Maps supply risks and forecasts disruption – a growing field post-Brexit and post-COVID.
• Entrepreneur: Needs to assess whether scaling up production is viable and profitable.

Supports Gatsby Benchmark 4: Linking curriculum learning to careers.

Teaching Notes

Based on our empathy research​​​​​, here are suggestions tailored to real classroom constraints and priorities:

Quick Starter:

• Ask students: “What would happen to supermarket supply if delivery driver wages rose by 20%?”
  • Follow with a visual shift in the supply curve.

Main Activity:

• Use recent news articles (e.g. fuel shortages, chip supply crises) to create group tasks: students identify the supply factor and explain the likely business response.

Stretch Task:

• Compare two firms: one labour-intensive, one tech-driven. Which is more sensitive to changes in wage costs? Why?

Common Misconceptions:

• Students often confuse movements along the supply curve with shifts of the curve.
• Diagrams sometimes show demand curves by mistake – practice drawing both and labelling clearly.

Top Tip:

• Link supply changes to real business strategy. For example, if production costs rise, will the firm absorb it, raise prices, or cut output?