Syllabus: Pearson Edexcel AS Business
Module: The Market
Lesson: 1.2.3 Markets

Introduction

This Pearson Edexcel AS Business lesson on 1.2.3 Markets sits within Theme 1: Marketing and People, following the building blocks of demand and supply. It moves learners from understanding individual demand and supply influences to the interaction between them – the market mechanism. This topic underpins much of the marketing strategy content that follows in 1.3 and introduces key skills such as using diagrams, interpreting market dynamics, and evaluating external shocks.

Crucially, it links to Assessment Objective 1 (knowledge), AO2 (application) and AO3 (analysis), supporting structured responses in Paper 1.

Key Concepts

• The Price Mechanism:
  Understand how prices are determined by the interaction of demand and supply, leading to market equilibrium. Students should be able to identify and explain shifts in either curve and how these affect equilibrium price and quantity.
• Equilibrium vs Disequilibrium:
  Explore what happens when the market is not in balance – excess demand or excess supply – and how prices adjust to restore equilibrium.
• Market Forces in Action:
  Evaluate how businesses and consumers respond to price changes. Students learn to anticipate outcomes when market conditions change, e.g. a new competitor, tax rise, or supply chain disruption.
• Diagrams & Analysis:
  Students must use supply and demand diagrams accurately, label them clearly, and explain movements using terms like “contraction”, “extension”, “shift”, and “movement along the curve”.

Real-World Relevance

• Fuel Prices:
  Global oil prices in early 2024 surged due to conflict in the Middle East and OPEC+ output cuts. UK petrol prices rose rapidly, showing how supply shocks can lead to higher equilibrium prices. Supermarkets like Tesco and Asda temporarily lost competitive edge due to supply constraints.
• Smartphone Markets:
  The launch of budget smartphones in emerging markets (e.g. Xiaomi in India) has shifted the demand curve outwards – driven by income growth and digital access expansion. Meanwhile, supply chain constraints during the pandemic pushed supply curves inwards, raising prices and reducing quantities sold.
• Dairy Shortages:
  In late 2023, UK supermarkets faced butter and cream shortages due to labour and import cost issues, causing disequilibrium and price spikes. Some retailers rationed items – a classic sign of demand exceeding supply.

These examples bring abstract graphs to life and reinforce why understanding market interactions is vital.

How It’s Assessed

This content is primarily tested in Paper 1: Marketing and People, typically within data response sections. Question types include:

• Explain questions (AO1/AO2):
  E.g. “Explain how an increase in supply affects equilibrium price.” (4–6 marks)
• Diagram-based analysis:
  Often students are required to draw or interpret supply and demand diagrams and explain shifts or movements.
• Contextual analysis (AO3):
  Students may be asked to analyse how market changes affect a specific business or sector.
• 8- or 10-mark analytical/evaluative questions where students apply market theory to real business scenarios, sometimes comparing the impact of demand-side vs supply-side changes.

Command words to watch for: Explain, Analyse, Evaluate, Use a diagram to show…

Enterprise Skills Integration

This lesson links tightly with:

• Problem-Solving and Decision-Making:
  Students assess how businesses should react to market shifts – raise prices, change suppliers, or innovate.
• Adaptability:
  Understanding how external shocks impact markets builds resilience and flexible thinking – core enterprise skills.
• Communication and Justification:
  Being able to explain a diagram clearly, or argue which side of the market has had the greatest effect, strengthens analytical communication.

Use MarketScope AI to simulate market changes in live case studies – e.g. modelling the impact of a VAT increase on a service-based business.

Careers Links

This lesson reinforces key concepts used in roles like:

• Market Analyst: Uses supply and demand models to forecast trends and guide pricing strategies.
• Retail Buyer: Reacts to market data, adjusts supply relationships based on cost and consumer shifts.
• Entrepreneur: Must navigate disequilibrium – knowing when to pivot, restock, or raise prices.
• Economist: Builds models to understand market dynamics, both theoretically and in applied business settings.

Supports Gatsby Benchmark 4 – linking curriculum learning to careers.

Teaching Notes

Practical Tips:

• Use everyday examples:
  Fuel, chocolate bars, and coffee are great starters. Ask students what happens when one becomes more expensive or scarce.
• Diagram confidence:
  Many students struggle with the basics. Use quick-fire activities – show a scenario, ask “Which curve moves?”, “Which way?”, “What happens to price?”
• Stretch Task:
  Give students a mixed-scenario prompt (e.g. demand rises due to trend, but costs rise too). Ask: What happens to price and quantity overall?

Common Pitfalls:

• Confusing movements along a curve with shifts of the curve.
• Not linking diagram changes to business behaviour – e.g. “Price goes up” without explaining what the firm might do in response.

Empathy Map Insights:

• Teachers want to save time and see impact. This lesson is a good one to co-teach with Economics or Careers – build cross-department links.
• SLT are looking for real-world readiness and Gatsby evidence. Encourage students to bring in their own examples for a short class discussion – minimal prep, big engagement.
• Careers Leads can reference this lesson when introducing roles in retail, logistics, or public policy where market awareness is essential.