This mini-lesson walks you through the core of OCR Topic 2 — The Role of Markets and Money: demand & supply and the equilibrium price, price elasticity of demand, competition, the labour market and wages, plus the functions of money and financial markets.
Work through each screen, answer the questions as you go (some are wordy, some are calculations like elasticity or % change) and collect ⭐ stars. Press Start when you're ready.
In a market, demand is how much consumers will buy at each price; supply is how much producers will sell. Both depend on price:
Shortages & surpluses: if demand > supply there is a shortage, which pushes the price up. If supply > demand there is a surplus, which pushes the price down. Prices adjust until the market clears at equilibrium.
PED measures how much quantity demanded responds to a change in price. It is a key idea for firms deciding whether to change prices.
Price rises 10%, quantity demanded falls 5%.
PED = 5% ÷ 10% = 0.5 → inelastic. Because demand is inelastic, raising price raises total revenue.
Tap an item, then tap the group it belongs to. Luxuries and goods with many substitutes are elastic; necessities with few substitutes are inelastic.
When a price changes, quantity demanded moves along the demand curve. To measure how big that response is, we calculate a percentage change:
At £10 demand is 200 units; price falls to £9 and demand rises to 220 units.
% change in Qd = (220 − 200) ÷ 200 × 100 = 10% rise.
Why it matters: once you have the % change in quantity demanded and the % change in price, you can put them into the PED formula to see whether demand is elastic or inelastic.
Competition is rivalry between firms for customers. More competition tends to bring lower prices, better quality, more choice and greater efficiency as firms fight to win business.
The labour market is where workers supply labour and firms demand it. The wage is the price of labour. Wages tend to be higher where skills are scarce, training is long, or demand for the product is strong.
Money makes exchange far easier than barter. Economists describe four functions of money:
Financial markets and institutions (such as banks) channel funds from savers to borrowers. They provide loans, and enable saving, borrowing and payments — supporting spending by consumers and investment by firms.
Link it up: without money, specialisation and trade would be very hard. Money and financial markets keep the whole economy's exchange and investment flowing.
Firms compete partly on how efficiently they use resources. Labour productivity is output per worker (or per hour). Higher productivity means lower costs per unit, which helps a firm compete on price.
Why it matters: a more productive workforce lets a firm produce more from the same resources. This links back to competition — the most efficient firms can charge lower prices and still make a profit.
Tap a description on the left, then its matching term on the right.
Demand & supply: demand slopes down, supply slopes up; they cross at the equilibrium price where the market clears
PED: %ΔQd ÷ %ΔP → >1 elastic (luxuries, many substitutes), <1 inelastic (necessities, few substitutes)
Competition: more rivalry → lower prices, better quality, more choice & efficiency; monopoly → more price-setting power
Labour market: workers supply labour, firms demand it; the wage is the price of labour
Money: medium of exchange · store of value · unit of account · standard of deferred payment
Financial markets: banks channel funds from savers to borrowers, enabling saving, borrowing & investment
You've covered the core of OCR Topic 2 — The Role of Markets and Money. Press Finish to see your score.
You've worked through The Role of Markets and Money for OCR GCSE Economics. 🎉
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