1. OCR A Level Economics AS/Year 1 Microeconomics © Hodder & Stoughton Limited 2015 Movements and shifts in demand and supply

2. OCR A Level Economics Movements in demand AS/Year 1 Microeconomics © Hodder & Stoughton Limited 2015 2 In the ‘Individual demand 1’ column of your table, write down how many video games you would buy each year at the different price levels. Once you have done this, find out what everyone else in your class bought at the different prices and fill in the ‘Market demand 1’ column of your table. Task: Using the market demand data, plot the demand curve for video games with price on the y-axis and quantity on the x-axis. Label it D 1. Price of video game Market demand 1 £10 £20 £30 £40 £50 £60

3. OCR A Level Economics Shifts of demand AS/Year 1 Microeconomics © Hodder & Stoughton Limited 2015 3 As the last exercise demonstrated, price clearly affects demand for a product. There are many non-price factors that also affect demand. Suppose your income has doubled since you filled in the table. Write down how many video games you will buy at each price now you are wealthier in the ‘Individual demand 2’ column. Then fill in the ‘Market demand 2’ column. Price of video game Market demand 1 Market demand 2 £10 £20 £30 £40 £50 £60 Task: Plot the second demand curve on the same diagram as D 1. Label this D 2. Extension: Can you think of any other factors that could cause you to demand more video games when the price remains unchanged?

4. OCR A Level Economics Movements and shifts AS/Year 1 Microeconomics © Hodder & Stoughton Limited 2015 4 Look at your two demand curves and remember how you constructed them. Using D 1, explain what is meant by a movement along the demand curve: A movement along the demand curve shows how quantity demanded responds to a change in price. Using D 1 and D 2, explain what is meant by a shift of the demand curve: A shift of the demand curve shows how demand responds to a change in a non-price factor at any given price. Extension answers — how many of the non-price factors did you guess correctly? An increase in the price of computer games (price of substitutes). A decrease in the price of games consoles (price of complements). A successful advertising campaign for video games (tastes and fashion). These three factors, in addition to income, represent the four non-price factors that cause the demand curve to shift.

5. OCR A Level Economics Applying this to supply AS/Year 1 Microeconomics © Hodder & Stoughton Limited 2015 5 You should now be able to apply what you have learnt about demand to movements and shifts of the supply curve. Task: Which diagram shows a movement and which shows a shift in supply? Explain what is meant by a movement along the supply curve and a shift of the supply curve. Extension: Can you think of any factors which could cause the supply of a product to change when the price remains unchanged?

6. OCR A Level Economics Summary exercise AS/Year 1 Microeconomics © Hodder & Stoughton Limited 2015 6 In each of the scenarios below, you need to decide: if supply or demand is affected if there is movement along or a shift of the curve the direction of the movement (extension/contraction) or shift (increase/decrease) 1Market: Frozen pizzas Event:An increase in the price of frozen pizzas due to an increase in demand Answer:A movement (extension) of the supply curve. 2Market: Holidays to Majorca Event:There is a serious outbreak of food poisoning at a resort in Florida. Answer:A shift (increase) of the demand curve. 3Market: Tablet computers Event:Suppliers drastically cut the price of tablets due to their costs of production falling. Answer:A movement (extension) of the demand curve. 4Market: Alcohol Event:The government decides to increase the tax charged on alcohol. Answer:A shift (decrease) of the supply curve.