What you'll learn
How supply and prices allocate resources.
Key ideas
- Supply rises as price rises; the equilibrium price clears the market.
- Excess demand raises price; excess supply lowers it.
- The price mechanism: signalling and rationing.
Exam tips
- Draw supply/demand diagrams.
- Explain how prices allocate resources.
Common mistakes
- Confusing shifts with movements.
- Ignoring the functions of price.