Syllabus: Pearson - GCSE Economics
Module: 1.1 The Market System
Lesson: Pearson - 1.1.3 Demand Supply and Market Equilibrium

Introduction

This lesson sits at the heart of Pearson Edexcel International GCSE Economics, forming a key part of Paper 1: Microeconomics and Business Economics. Section 1.1.3 focuses on demand, supply and market equilibrium — foundational ideas that underpin students’ ability to interpret and explain how prices are set, why they change, and what that means for consumers and producers.

For teachers, this is a topic where real-life relevance is easy to demonstrate. It’s plug-and-play with current events, ideal for developing diagram and reasoning skills, and directly aligned to the type of questions students will face in exams.

Key Concepts

Students need to grasp the mechanics of markets, including:

• Demand

  • Defined as the quantity of a good or service consumers are willing and able to buy at a given price.

  • Movements along the demand curve occur due to price changes.

  • Shifts in the demand curve are caused by factors such as income, advertising, population changes, and the price of substitutes or complements.

• Supply

  • Defined as the quantity of a good or service that producers are willing and able to offer for sale at a given price.

  • Movements along the supply curve are caused by price changes.

  • Shifts are influenced by production costs, technology, subsidies, indirect taxes, and natural factors like weather.

• Market Equilibrium

  • The point at which supply equals demand — establishing the equilibrium price and quantity.

  • Students should be able to interpret and draw diagrams showing equilibrium, excess demand (shortage), and excess supply (surplus).

  • They also need to understand how market forces eliminate these imbalances through price adjustments.

Real-World Relevance

This content is incredibly easy to anchor in everyday life. For example:

• The rise in egg prices during supply chain disruptions is a clear case of reduced supply shifting the supply curve left.

• A celebrity endorsement that spikes demand for a product (like Prime hydration drinks) shifts the demand curve right, raising both equilibrium price and quantity.

• Government subsidies to renewable energy producers shift the supply curve right, lowering prices and increasing output.

Encourage students to bring in headlines and use them as live case studies — it builds their confidence and application skills.

How It’s Assessed

The Pearson Edexcel exam for Paper 1 includes four compulsory questions, each worth 20 marks. In this topic, students might encounter:

• Multiple-choice and short-answer questions testing basic definitions and diagrams.

• Data response tasks involving market scenarios where students interpret graphs or identify shifts.

• Open-ended questions where students must explain market changes using diagrams and appropriate economic terminology.

Command words to focus on include: explain, analyse, calculate, draw, and evaluate. Students should be confident using diagrams to support written analysis — it’s often the difference between mid and top-band marks.

Enterprise Skills Integration

This topic offers natural entry points to develop:

• Problem-solving, as students assess how a market responds to changes like a tax or new trend.

• Decision-making, when comparing the effects of subsidies vs. advertising on market equilibrium.

• Numeracy and data interpretation, especially when calculating excess demand or identifying the equilibrium on a graph.

You could set up quick, classroom-based “market simulations” where students act as buyers and sellers, adjusting prices in real-time to find equilibrium.

Careers Links

This unit supports Gatsby Benchmarks 4, 5, and 6 by linking curriculum content with future careers and employer engagement. It’s highly relevant to:

• Business and finance roles, where understanding supply and demand informs pricing strategies and forecasting.

• Marketing, where shifts in demand are influenced by campaign success.

• Policy and government, where interventions like subsidies or taxes are tools to manage supply and demand.

Highlight real roles like economic analyst, policy advisor, or business development executive to show students the application of these concepts in the world of work.

Teaching Notes

What works well:

• Use visual aids consistently. Diagrams aren’t just support tools — they’re part of the skillset students are expected to master.

• Link theory to current events. Students find it easier to remember shifts when they’ve seen them happen in real time.

Common pitfalls:

• Confusing shifts with movements. Revisit this regularly with mini-whiteboard tasks.

• Forgetting to label diagrams clearly — this is essential for marks.

Extension ideas:

• Ask students to bring in their own news example of a market in equilibrium or disequilibrium.

• Run a debate: “Should the government intervene in the housing market?” and have students apply supply and demand logic to their arguments.