Market Equilibrium: Equilibrium Price and Quantity

    AQA
    GCSE

    Market equilibrium is defined as the state where quantity demanded equals quantity supplied ($Q_d = Q_s$), resulting in a stable market-clearing price with no inherent tendency to change. Mastery of this topic requires precise application of the price mechanism—specifically the rationing, signalling, and incentivising functions—to explain how disequilibrium states (excess demand or supply) are corrected through price adjustments. Candidates must demonstrate competence in comparative statics, shifting curves to analyse the impact of exogenous shocks on $P$ and $Q$ under *ceteris paribus* conditions.

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    Objectives
    4
    Exam Tips
    4
    Pitfalls
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    Key Terms
    4
    Mark Points

    What You Need to Demonstrate

    Key skills and knowledge for this topic

    • Award marks for accurate construction of supply and demand diagrams with correctly labelled axes (Price/Quantity), curves (D/S), and equilibrium points (P/Q).
    • Credit logical chains of reasoning that explain the mechanism of adjustment from disequilibrium to equilibrium (e.g., 'excess demand leads to upward pressure on price').
    • Responses must distinguish between movements along the curve (price changes) and shifts of the curve (non-price determinants).
    • High-level responses must integrate context from the Item (case study) to justify why a specific curve shifts and the magnitude of the impact on P and Q.

    Marking Points

    Key points examiners look for in your answers

    • Award marks for accurate construction of supply and demand diagrams with correctly labelled axes (Price/Quantity), curves (D/S), and equilibrium points (P/Q).
    • Credit logical chains of reasoning that explain the mechanism of adjustment from disequilibrium to equilibrium (e.g., 'excess demand leads to upward pressure on price').
    • Responses must distinguish between movements along the curve (price changes) and shifts of the curve (non-price determinants).
    • High-level responses must integrate context from the Item (case study) to justify why a specific curve shifts and the magnitude of the impact on P and Q.

    Examiner Tips

    Expert advice for maximising your marks

    • 💡Always use a ruler to draw diagrams; unlabelled or messy diagrams are capped at lower mark bands.
    • 💡When explaining a shift, follow the 'DEC' structure: Define the factor, Explain the shift direction, Conclude the impact on Price and Quantity.
    • 💡Use dotted lines to clearly show the transition from the original equilibrium (P, Q) to the new equilibrium (P1, Q1).
    • 💡In 15-mark questions, evaluate the 'extent' of the change by considering the price elasticity of the opposing curve.

    Common Mistakes

    Pitfalls to avoid in your exam answers

    • Confusing a 'movement along' the curve with a 'shift' of the curve.
    • Inverting the labels for Price and Quantity on the axes, or labelling curves incorrectly.
    • Stating that a shift in demand causes a shift in supply (rather than a movement along the supply curve).
    • Failing to indicate the new equilibrium coordinates (P1, Q1) after a shift.

    Key Terminology

    Essential terms to know

    Likely Command Words

    How questions on this topic are typically asked

    State
    Draw
    Calculate
    Explain
    Analyse
    Discuss

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