Supply and demand in real markets

Exam questions describe a real event, such as a frost, a new tax or a celebrity advert, and ask what happens to price and quantity. Use the same three steps every time.

Practise this lesson free (7 questions)

Three steps

1. Does the event affect demand or supply (or both)? Remember: a change in the good's own price is a movement along a curve, not a shift.
2. Does the curve shift right (increase) or left (decrease)?
3. Read off the new equilibrium: what happens to price and quantity?
ChangePriceQuantity
Demand increases (shifts right)RisesRises
Demand decreases (shifts left)FallsFalls
Supply increases (shifts right)FallsRises
Supply decreases (shifts left)RisesFalls

Examples

A frost destroys part of the orange harvest: supply shifts left, so the price of oranges rises and quantity falls.
A popular athlete advertises a sports drink: demand shifts right, so price and quantity rise.
The price of coffee rises sharply: demand for tea (a substitute) shifts right; demand for coffee filters (a complement) shifts left.
A government gives a subsidy to electric car makers: supply shifts right, so the price falls and more are bought.
A new indirect tax on sugary drinks: supply shifts left, so the price rises and quantity falls.

Using a schedule

Before an advertising campaign, demand and supply for a snack bar are shown below. The campaign raises demand by 300 bars at every price.
Equilibrium moves from $4 and 600 bars to $5 and 750 bars. At the old price of $4 there would be excess demand of 300 bars, which pushes the price up.
Price ($)Qd beforeQd afterQs
29001200300
37501050450
4600900600
5450750750
6300600900

When both curves move

If demand rises and supply rises, quantity certainly rises, but the effect on price depends on which shift is bigger.
If demand rises and supply falls, price certainly rises, but the effect on quantity depends on which shift is bigger.
In the exam, explain each shift and say which effect is likely to be larger.
Worked example

Bad weather in a major coffee-growing country destroys a large part of the crop. Explain the effect on the world price and quantity of coffee.

  1. Bad weather is a natural factor, so it affects supply.
  2. Less coffee can be produced at every price: supply shifts left.
  3. At the old price there is excess demand, so the price rises and the quantity bought falls.

Answer: Price rises; quantity falls.

Key idea

Decide whether an event affects demand or supply, decide the direction of the shift, then read off the new equilibrium. More demand: price and quantity rise. More supply: price falls, quantity rises. Less supply: price rises, quantity falls.

Key words
Supply
The quantity of a good that producers are willing and able to sell at a given price over a period of time.
Demand
The quantity of a good that consumers are willing and able to buy at a given price over a period of time.
Subsidy
Money given by the government to producers to lower costs or encourage output.
Indirect tax
A tax on spending, such as VAT, collected from sellers.

All International GCSE Economics key terms and definitions →

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Extra practice

2 more questions

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  1. A new tax raises the cost of making cigarettes. What happens in the cigarette market?

    1. Supply shifts left: price rises and quantity falls
    2. Supply shifts right: price falls
    3. Demand shifts right
    4. There is no change
    Show the answer

    Answer: Supply shifts left: price rises and quantity falls

    Higher costs reduce supply.

  2. Incomes fall and restaurant meals are a normal good. What happens to the restaurant meal market?

    1. Demand shifts right
    2. Supply shifts left
    3. Nothing changes
    4. Demand shifts left: price and quantity fall
    Show the answer

    Answer: Demand shifts left: price and quantity fall

    Lower income reduces demand for normal goods.

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Sources and references

Checked by the GCSE-ready editorial team, 17 October 2026. Last updated 2 October 2026. Spotted a mistake? Tell us and we will fix it.

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