How Markets Work is a core part of GCSE Economics. Revise the key concepts and common mistakes below, then lock them in with the free games.
Key concepts
DemandQuantity buyers are willing to buy at each price.
SupplyQuantity sellers will offer at each price.
Law of DemandAs price rises, quantity demanded falls.
Law of SupplyAs price rises, quantity supplied rises.
EquilibriumPrice where demand equals supply.
MarketAny place buyers and sellers meet to trade.
Normal goodDemand rises as income rises.
Inferior goodDemand falls as income rises.
Derived demandDemand based on need for another product.
Joint supplyProducing one good also produces another.
Excess demandDemand greater than supply at given price.
Excess supplySupply greater than demand at given price.
ShiftEntire curve moves left or right.
MovementChange along a curve due to own-price change.
Common mistakes to avoid
Questions where students often pick the tempting wrong answer — make sure you know the right one:
What is the difference between a shift in demand and a movement along the demand curve?✗ A change in price shifts the demand curve. ✓ A movement along the curve is caused by a change in price; a shift of the whole curve is caused by changes in other factors (income, tastes, substitute prices).
What does price elasticity of demand measure?✗ PED measures how flexible or stretchy a product is. ✓ The responsiveness of quantity demanded to a change in price — the percentage change in quantity divided by the percentage change in price.
Which factor causes a SHIFT in the demand curve (not a movement along it)?✗ A rise in the price of the good itself ✓ A rise in consumer income
What happens at equilibrium price?✗ Shortage of the good ✓ Quantity demanded equals quantity supplied
What causes the supply curve to shift?✗ When demand rises, the supply curve shifts right to meet it. ✓ Changes in production costs, technology, taxes/subsidies, number of producers, expectations — anything affecting supply other than the good's own price.
Practise How Markets Work — free games
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