Demand & Supply Explained — IGCSE Economics (Curves, Shifts & Equilibrium)

Demand and supply is the core model of microeconomics — and one of the most heavily tested topics in IGCSE Economics. Get it right and you can explain how almost any price in the real world is set. This lesson covers the demand and supply curves, the difference between a movement and a shift, and how markets reach equilibrium.

What is a market?

A market is any arrangement that brings buyers and sellers together. Goods flow one way; money flows the other.

Demand and effective demand

Demand is not just wanting something. It must be backed by the ability to pay — that is effective demand. The law of demand says that, all else equal, price and quantity demanded move in opposite directions. Plot price against quantity and the demand curve slopes downward from left to right.

Movement vs shift (demand)

A change in the good's own price causes a movement along the curve — an expansion or contraction of demand. Anything other than the good's own price shifts the whole curve — income, tastes, population, prices of related goods, and advertising.

Supply

Supply mirrors demand from the producer's side — willing and able to sell. The law of supply: price and quantity supplied move in the same direction, so the supply curve slopes upward. Non-price factors that shift supply: production costs, technology, taxes and subsidies, and the number of firms.

Equilibrium

Where the demand and supply curves cross, quantity demanded equals quantity supplied. This is the equilibrium price and quantity — the market clears.

Shortage and surplus

If price is set below equilibrium, demand exceeds supply — a shortage; competition among buyers pushes price up. If price is above equilibrium, supply exceeds demand — a surplus; firms cut prices to clear stock, pushing price down. Either way, the market returns to equilibrium.

Exam tips

Learn the precise command-term definitions, always label your axes (price on the vertical, quantity on the horizontal), and be crystal clear about movement (own price) versus shift (everything else).

🎥 Watch the full lesson: youtube.com/watch?v=Slz-xyKqNfw
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