GCE Business

Studies

Supply and demand

Learning Objectives
1. Define demand and supply(E/D)
2. Explain how changes in demand and supply
will affect price(C)
3. Analyse the impact of a change in demand or
supply on consumer behaviour(A/B)
 Supply and Demand Graph
Price £

Quantity
Price £ Supply and Demand Graph

Demand Curve

Quantity
 Supply and Demand Graph
Supply Curve
Price £

Demand Curve

Quantity
 Supply and Demand Graph
Supply Curve
Price £

Equilibrium point

Demand Curve

Quantity
What factors affect supply and
demand?

Factors
affecting supply
and demand
March 2012: Petrol Panic!
So what happened?
 The government warned there might be a petrol
strike and to top up (turns out there wasn’t!)
 People thought they’d be a shortage in supply
 Demand then increased creating a shortage
 Petrol stations charged more as they new people
would pay
 Sales increased 81%
 The government made an extra £32 million in fuel
duty
Commodity Market
 A commodity is another word for raw
materials such as coal, oil, copper, iron ore,
wheat and soya

 They are traded all around the world and the

price that they are brought and sold is
determined by demand and supply
Causes of Shortages and Surpluses
in Commodity Markets
 Many things can affect the supply of a given
commodity including:
 Failure of a crop – (wheat prices soared when
fires in Russia destroyed a lot of the harvest)
 Natural disasters – (Japanese Tsunami affected
the supply of nuclear power for energy)
 Fear of War – (oil prices increased because
people were worried about the war in Libya)
 Weather – some years farmers get the right
weather to produce lots of crops
So, in summary…
 An increase in supply or decrease in
demand will reduce price

 A decrease in supply or increased in

demand will increase price.
3 Mark question
 How is the government’s ban on
advertising unhealthy food during
children’s TV programmes likely to affect
the market for Cadbury’s Dairy Milk?
Outcomes
By the end of the lesson you will:
1. Define demand and supply(E/D)
2. Explain how changes in demand and supply
will affect price(C)
3. Analyse the impact of a change in demand or
supply on consumer behaviour(A/B)
 What’s been happening to the
demand and supply of loom bands?
 Task:
Draw the demand and supply diagrams to illustrate the
following stages of demand and production of loom
bands:

1. Loom bands become very popular as they are worn

by celebrities and Royalty and are seen as a
fashionable item.
2. Firms shift resources to increase production of loom
bands and find more effective methods of
manufacturing the product.
3. Loom bands become less popular as customers
tastes change towards pre-prepared jewellery
manufactured from more durable materials.
 S1 Stage 1
Price Loom bands
become very
popular as they
are worn by
P2 Excess celebrities and
Demand Royalty and are
P1
seen as a
fashionable
D2 item.
D1

Q1 Q2
Quantity
 Stage 2
S1 Firms shift
Price
resources to
S2 increase
production of
P2 loom bands and
find more
P3 effective
methods of
manufacturing
D2 the product.

Q2 Q3
Quantity
 Stage 3
Loom bands
become less
Price
popular as
S2 customers
tastes change
towards pre-
prepared
P3 jewellery
P4 manufactured
from more
D2 durable
D3
materials.
Q4 Q3
Quantity