Demand is the quantity buyers will take at a price in a given time. Supply is the quantity sellers will offer. A movement along a curve is not the same as a shift of the curve.
The idea
The law of demand says that, other things equal, a higher price leads to a lower quantity demanded. The law of supply says that a higher price leads to a higher quantity supplied. The other things are income, tastes, the prices of related goods, and the cost of production. When only the price of this good changes, you move along the existing curve. When one of those other things changes, the whole curve shifts. A rise in income shifts demand for a normal good to the right. A rise in the cost of production shifts supply to the left.
Equilibrium is the price at which quantity demanded equals quantity supplied. Above that price there is a surplus and sellers tend to cut the price. Below it there is a shortage and buyers bid the price up. A shift in demand or supply moves the equilibrium. Do not say the curve moves when you were told only that the price changed. That is a movement along the curve, and it is a different mark.
What earns the marks
Other things equal is part of the law. A definition that omits it is incomplete, because without it a change in income could cancel the price effect. Shift versus movement is the question that separates scripts. Name the factor that shifted, the direction, and what happens to equilibrium price and quantity if the question asks for the outcome. A diagram is welcome in an exam booklet. Here the words have to carry the same information.
Practice questions
These are practice questions in the style of the paper, with a model answer and a mark scheme. They are not a promise of what your paper will ask.
1Question 1
5 marks
(a) State the law of demand. (2 marks)
(b) Explain the difference between a movement along a demand curve and a shift of the curve. (3 marks)
Model answer
(a) Other things equal, as price rises the quantity demanded falls.
(b) A movement along the curve is caused by a change in the price of the good itself. A shift is caused by a change in something else, such as income, and the whole curve moves.
Mark scheme
Price and quantity demanded move in opposite directions1 mark
Other things equal, or ceteris paribus1 mark
Movement: own price changes1 mark
Shift: a non price factor changes1 mark
A correct example of a shift factor, such as income or tastes1 mark
2Question 2
2 marks
The cost of flour rises for all bakers. State what happens to the supply curve of bread, and to the equilibrium price of bread. (2 marks)
Model answer
The supply curve shifts left. The equilibrium price of bread rises.
Mark scheme
Supply shifts to the left, or decreases1 mark
Equilibrium price rises1 mark
3Question 3
2 marks
Define equilibrium price. (2 marks)
Model answer
The price at which quantity demanded equals quantity supplied, so there is no tendency for the price to change.
Mark scheme
Quantity demanded equals quantity supplied1 mark
No pressure for the price to rise or fall, or the market clears1 mark
Practise Economics with Anna
More questions on this topic are inside GLearn, marked as you answer, with the reason written out. The first ones need no account.
What is the difference between a movement and a shift?+
A change in the price of the good itself moves you along the demand or supply curve. A change in another factor, such as income or the cost of production, shifts the whole curve. Calling a price change a shift loses the mark.
What is an equilibrium price?+
The price at which the quantity buyers want equals the quantity sellers offer. A higher price leaves a surplus. A lower price leaves a shortage. The surplus and the shortage push the price back toward equilibrium. All WASSCE Economics past questions