QCE Economics - Unit 1 - Market forces

Curve shifts, shortages and surpluses

Diagnose demand and supply shifts, calculate disequilibrium and preserve ambiguity under simultaneous changes.

Part of the free QCE Economics notes library for Unit 1: Market forces.

Updated 2026-08-13 - 7 min read

The safest graph routine begins with the changed determinant, not the observed price. Own price creates movement along the existing curve. Income, tastes, population, costs, technology, policy and expectations can shift a curve.

For one shift, redraw the affected curve and derive price and quantity. For simultaneous shifts, analyse each separately, then combine. If both demand and supply shift right, equilibrium quantity rises because both effects reinforce. Price is ambiguous because demand raises it while supply lowers it. Do not guess without relative-magnitude evidence.

Useful observational diagnosis:

• price up, quantity up: consistent with demand increasing
• price down, quantity up: consistent with supply increasing
• price down, quantity down: consistent with demand decreasing
• price up, quantity down: consistent with supply decreasing

These patterns do not prove causation. Direct determinant evidence and timing must corroborate the model.

A shortage is $Q_d-Q_s$ at a stated price. A surplus is $Q_s-Q_d$. Price ceilings below equilibrium tend to create shortages; price floors above equilibrium tend to create surpluses, subject to enforcement, rationing and adjustment.

Use dated price and quantity series with input costs, inventories, weather, policy and capacity evidence. Make periods and units consistent.

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Classroom deep dive

The model in full

An own-price change causes a movement along the existing demand or supply curve. A non-price determinant changes willingness or ability at every price and shifts the curve. Demand determinants include income, tastes, population, expectations and related-good prices; supply determinants include input costs, technology, producer numbers, taxes, subsidies, expectations and natural conditions. A binding price below equilibrium produces shortage; a price above equilibrium produces surplus. When both curves shift, one equilibrium dimension may be certain while the other is ambiguous, so the analyst must compare relative shift sizes rather than inventing precision.

Concepts your explanation must connect

1. A price rise cannot be used as the cause of a demand-curve shift when price is the vertical-axis variable; observed price and quantity are outcomes of interacting demand and supply changes.
2. A shortage is $Q_d-Q_s$ at a specified price; a surplus is $Q_s-Q_d$. It is not the same as 'high demand' or unsold stock caused by poor management.
3. Housing prices can rise despite increased supply if demand shifts further right; flower prices can rise despite festival supply preparation if the temporary demand shift is larger.

Construct the reasoning, one link at a time

1. Link 1: Identify whether the stimulus changes the good's own price or a named non-price determinant, and specify which curve is affected.
2. Link 2: Shift only the justified curve first, then derive the unambiguous direction of equilibrium price and quantity.
3. Link 3: For simultaneous shifts, analyse each independently and combine: same-direction effects reinforce, opposite-direction effects require relative-magnitude evidence.
4. Link 4: At a controlled or sticky price, calculate shortage or surplus and explain rationing, inventory, queues, bidding or later production adjustment.

After constructing the chain, inspect every arrow. An arrow should represent an incentive, accounting flow, behavioural response, curve movement or institutional constraint. If it represents only chronology, it has not yet explained the outcome. State the relevant market, decision-maker, time horizon and ceteris paribus condition where each matters.

Fully worked reasoning

Notice that the conclusion is narrower than the whole topic. It answers the supplied problem, preserves its units and assumptions, and does not convert a conditional model into a universal claim. In calculations, show the formula, substitution, working and unit. In graphs, label axes, original and new curves, equilibrium points and the direction of change.

Economic inquiry workshop

QCAA's inquiry process moves through forming, selecting, analysing and evaluating. Use that sequence rather than collecting data first and inventing a question later.

Form. Which curve best explains a selected short-run price and quantity episode?

Select. Collect dated price, quantity and determinant evidence for a narrowly defined market before and after the event, including plausible demand and supply influences.

Analyse. Use the joint price–quantity pattern as a diagnostic, then test it against direct evidence such as input costs, population, weather, inventories or policy dates.

Evaluate. Price and quantity can be measured differently, lags matter and simultaneous shifts are common. Present alternative models and identify what evidence would discriminate between them.

For every dataset, record publisher, exact series or table, units, observation period, release date, adjustment basis and revision status. Current evidence means the newest appropriate observation available—not merely a recently updated webpage. Triangulate the model with direct determinant evidence and at least one plausible competing explanation.

Misconception clinic

Repair: Use 'increase in demand' for a curve shift and 'increase in quantity demanded' for a movement. A supply increase lowers price ceteris paribus; with both curves rightward, quantity rises while only price is ambiguous.

A useful correction names the first broken definition or causal link, rebuilds from that point, and explains why the revised conclusion follows. Adding terminology to the original claim without changing its logic is not a repair.

Unfamiliar transfer

For a tax, subsidy, expectation change, income shock or technology improvement, redraw from the determinant and preserve ambiguity whenever the model cannot rank shift magnitude.

Use this response frame:

1. Define the unfamiliar context and the relevant economic variable.
2. Reconstruct the model rather than copying the worked conclusion.
3. Calculate or graph the change with labels and units.
4. Trace the mechanism and identify a countervailing channel.
5. Evaluate against a named criterion for specified stakeholders and time horizons.
6. State which fresh evidence would resolve the remaining uncertainty.

Final verification: Name own-price versus determinant, curve, direction and equilibrium effects; if two shifts oppose on one axis, state ambiguity and the evidence needed to resolve it.

Syllabus mapping

This lesson explicitly addresses the following mapped QCAA statements:

• Distinguish movements along from shifts of demand and supply curves; express each graphically and explain the impact on equilibrium price and quantity.
• Analyse the impact of non-price factors on demand and supply curves, and equilibrium price and quantity in various situations, with diagrams. Challenging economic problems and application of economic theory can be considered, e.g. how housing prices increase despite increases in supply, or how Valentine’s Day flowers increase in price despite a significant increase in supply of flowers.
• Analyse market situations that are not in equilibrium in the short term, and express graphically to demonstrate shortage and surplus (i.e. the operation of the ‘invisible hand’ as explained by Adam Smith).

Sources

• QCAA, Economics 2025 v1.4 syllabus (March 2026)
• QCAA, Economics senior subject page
• QCAA, Economics 2025 v1.4 syllabus amendment report

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