Price Mechanism and its Functions / Demand and Supply Analysis and its Applications

H2 Economics - syllabus 9570, 2026

Original teaching notes

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Explain how demand and supply changes affect prices, quantities, wages and revenue, using worked examples and market evidence.

• What do demand and supply measure?

  Quantities at different prices, in a defined market.

• Market demand and supply

  Add quantities at the same price.

• A shift or a movement?

  Ask: did this good's own price change?

• What shifts demand?

  Explain why buyers want more or less at the same price.

• What shifts supply?

  Explain why sellers can offer more or less at the same price.

• How does a shortage change the price?

  Compare quantities at the current price first.

• When one curve shifts

  Explain how a change in demand or supply affects price and quantity.

• When both curves shift

  Identify which outcome is certain and which depends on the relative effects of the shifts.

• How prices allocate resources

  Prices signal, create incentives and ration goods.

• Consumer expenditure and producer revenue

  Calculate how a change in price and quantity affects total spending and sales revenue.

• Wages and employment

  Workers supply labour; employers demand it.

• Consumer and producer surplus

  Measure the gains buyers and sellers receive from trade.

• Changes in consumer and producer surplus

  Compare the areas before and after the change.