When demand shifts, the price and the quantity move the same way as demand.
Demand shifts
Demand rises
A health campaign makes bananas popular.
Demand falls
A cheaper fruit draws buyers away.
Our example (made-up numbers)
| Price | Sellers offer (S1) | Buyers want before (D1) | Buyers want after a rise (D2) | Buyers want after a fall (D2) |
|---|---|---|---|---|
| €5 | 30 | 50 | 70 | 30 |
| €6 | 40 | 40 | 60 | 20 |
| €7 | 50 | 30 | 50 | 10 |
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When supply shifts, the price moves the opposite way to supply; the quantity follows supply.
Supply shifts
Supply falls
A cyclone destroys plantations.
Supply rises
New irrigation raises yields.
Our example (made-up numbers)
| Price | Buyers want (D1) | Sellers offer before (S1) | Sellers offer after a fall (S2) | Sellers offer after a rise (S2) |
|---|---|---|---|---|
| €5 | 50 | 30 | 10 | 50 |
| €6 | 40 | 40 | 20 | 60 |
| €7 | 30 | 50 | 30 | 70 |
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What happens to demand
- When supply shifts, the demand curve does not move.
- Buyers move along D: a higher price means quantity demanded falls.
Remember it as: Demand: price and quantity move together. Supply: the price moves the other way.
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Sometimes both curves shift at once. Then one of price or quantity is certain; the other depends on which shift is bigger.
Iron ore: demand falls and supply rises
Demand falls
Steelmakers build less, so they buy less iron ore at every price.
Supply rises
New mines open, so more is offered at every price.
The price falls for certain
Both shifts push it down: €6 to €4 a tonne.
The quantity could go either way
Demand pulls it down, supply pushes it up. Here they cancel out: 40 million tonnes.
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Paper 1 asked this in May 2024, as part (a) for 10 marks.
Explain how one determinant of demand might lead to a decrease in the price of a good and how one determinant of supply might lead to an increase in its price.
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See the answer broken into clear points, with guidance on how each point earns marks.
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What the diagrams must show
- Two diagrams, each with P and Q axes.
- Diagram 1: S, D1 → D2 to the left, P1 → P2 down and Q1 → Q2.
- Diagram 2: D, S1 → S2 to the left, P1 → P2 up and Q1 → Q2.
- Say surplus in half 1 and shortage in half 2.
How the 10 marks are given
| Marks | What your answer needs |
|---|---|
| 9–10 | Both parts fully explained, terms used correctly all the way through, the diagram included and fully explained |
| 7–8 | Both parts explained, terms mostly right, the diagram included and explained |
| 5–6 | Partly explained, some terms, the diagram included |
| 6 at most | Only one of the two parts answered, however good it is |