Using Supply and Demand Diagrams Revision Notes | GCSE OCR Economics
When demand increases, the demand curve shifts right and both equilibrium price and equilibrium quantity rise. Free GCSE Economics notes and 12 FAQs.
Updated 24 Mar 2026 · Revise Right Team
Using Supply and Demand Diagrams is part of Price in GCSE OCR Economics.
6 min
Reading time
41
Lessons in this topic
GCSE OCR
Pathway
Reviewed by Revise Right
Content review
What this lesson covers
When demand increases, the demand curve shifts right and both equilibrium price and equilibrium quantity rise. Free GCSE Economics notes and 12 FAQs.
Use supply and demand diagrams to show the impact of changes in market conditions on equilibrium price and quantity
Apply supply and demand diagrams to real-world UK markets including housing, labour, and food
Demonstrate how revenue can be shown on a supply and demand diagram as a rectangle (P x Q)
Analyse the effect of demand shifts, supply shifts, and simultaneous shifts on market equilibrium
Key ideas to keep in view
Use this lesson to stay inside Price while connecting the detail back to the wider The role of markets and money topic.
Shift in Demand: A movement of the entire demand curve to the left or right, caused by a change in a non-price factor such as income, tastes, population, or the price of substitutes/complements.
Shift in Supply: A movement of the entire supply curve to the left or right, caused by a change in a non-price factor such as costs of production, technology, number of firms, or government regulation.
New Equilibrium: The new point where the shifted supply or demand curve intersects the other curve, giving a new equilibrium price and quantity.
Revenue: The total income a firm receives from selling a product, calculated as price multiplied by quantity sold (P x Q). On a diagram, this is shown as the area of a rectangle from the origin to Pe and Qe.
Ceteris Paribus: A Latin phrase meaning 'all other things being equal'. Used in economics to isolate the effect of one variable while assuming all other factors remain unchanged.
Revision notes
Read the core explanations from Using Supply and Demand Diagrams before testing yourself from memory.
1. Why This Matters
Supply and demand diagrams are the single most important tool in GCSE Economics. They appear in almost every exam paper, and being able to draw, label, and interpret them correctly can earn you a huge number of marks. In this lesson, you will learn to use these diagrams to analyse real changes in markets - from UK housing prices to the cost of your weekly food shop.
More importantly, you will learn to show revenue on a diagram and to handle the tricky exam questions where both supply and demand shift at the same time. Mastering these skills separates a grade 7-9 answer from a grade 4-5 answer.
2. Demand Shift - New Equilibrium
Real-world example: UK housing market. Between 2020 and 2022, demand for houses outside London surged. Remote working meant people no longer needed to live near their office. Population growth in areas like the South West and East Midlands increased. Low interest rates made mortgages cheaper. All of these factors shifted the demand curve for houses to the right - at every price, more people wanted to buy.
On the diagram below, D shifts right to D1. The new equilibrium moves from E to E1. Both equilibrium price and equilibrium quantity increase. Average UK house prices rose from about £230,000 in January 2020 to over £290,000 by mid-2022.
Worked example: Analysing a Demand Shift in the UK Housing Market
Using a supply and demand diagram, explain the effect of an increase in remote working on the UK housing market.
Method: Identify the factor, show the shift, find new equilibrium, state the effect
Remote working increases demand for housing (especially outside cities) at every price level. This is a non-price factor, so it causes the demand curve to shift. — Changes in tastes/preferences and working patterns shift the demand curve, not a movement along it.
Draw original S and D curves with equilibrium at P1, Q1. Shift D to the right to D1. Label the new equilibrium E1 at P2, Q2. — An increase in demand shifts D to the right. Always label original (P1, Q1) and new (P2, Q2) equilibrium.
Equilibrium price rises from P1 to P2. UK house prices increased significantly. — When demand increases and supply stays the same, price rises.
Equilibrium quantity rises from Q1 to Q2. More houses are bought and sold. — Higher price encourages more supply (movement along the supply curve), so more transactions occur.
Answer: Remote working shifts the demand curve for housing to the right (D to D1). Equilibrium price rises from P1 to P2 and equilibrium quantity rises from Q1 to Q2. House prices increase and more homes are traded.
3. Supply Shift - New Equilibrium
Real-world example: UK food prices and the cost-of-living crisis. In 2022-2023, the supply of food in the UK was hit by multiple shocks. Energy prices soared (raising production and transport costs), the war in Ukraine disrupted grain and sunflower oil supplies, and poor harvests in southern Europe reduced fruit and vegetable output. All of these factors shifted the supply curve for food to the left - at every price, less food was being supplied.
When supply decreases (S shifts left to S1), the new equilibrium has a higher price and a lower quantity. UK food price inflation reached 19.2% in March 2023, the highest rate in over 45 years. Consumers had to pay more for less food.
Summary: Effects of shifts in supply and demand on equilibrium price and quantity
Change in Market
Demand Curve
Supply Curve
Effect on Price
Effect on Quantity
Increase in demand
Shifts right
No change
Rises
Rises
Decrease in demand
Shifts left
No change
Falls
Falls
Increase in supply
No change
Shifts right
Falls
Rises
Decrease in supply
No change
Shifts left
Rises
Falls
4. Revenue on a Supply and Demand Diagram
On a supply and demand diagram, revenue can be shown as a shaded rectangle. The height of the rectangle is the equilibrium price (Pe), and the width is the equilibrium quantity (Qe). The area of this rectangle = Pe x Qe = total revenue earned by firms in the market.
This is powerful because it lets you visually see how changes in equilibrium affect revenue. If demand increases (shifting D right), both Pe and Qe rise, making the revenue rectangle larger. If supply decreases (shifting S left), Pe rises but Qe falls - the rectangle becomes taller but narrower, and the net effect on revenue depends on the relative size of each change.
How changes in equilibrium affect total revenue
Scenario
Price (£)
Quantity Sold
Revenue (P x Q)
Original equilibrium
5
200
£1,000
After demand increase
7
300
£2,100
After supply decrease
8
150
£1,200
Worked example: Calculating Revenue from a Supply and Demand Diagram
A market is in equilibrium at a price of £12 and a quantity of 500 units. Demand then increases, moving the equilibrium to a price of £15 and a quantity of 650 units. Calculate the change in total revenue and show how this would appear on a diagram.
Method: Calculate revenue before and after, find the change, describe the diagram
Original TR = P1 x Q1 = £12 x 500 = £6,000 — Revenue is price times quantity at the original equilibrium.
New TR = P2 x Q2 = £15 x 650 = £9,750 — After the demand increase, both price and quantity are higher.
Change in TR = £9,750 - £6,000 = £3,750 increase — Revenue has increased by £3,750 as a result of the demand increase.
On the diagram, the original revenue rectangle has height £12 and width 500. The new revenue rectangle has height £15 and width 650. The new rectangle is both taller and wider, clearly showing the revenue increase. — Revenue is shown as a rectangle from the origin to Pe on the y-axis and Qe on the x-axis.
Answer: Original revenue = £6,000. New revenue = £9,750. Revenue increases by £3,750. On the diagram, the revenue rectangle becomes both taller (higher price) and wider (greater quantity).
5. Both Curves Shift - The Tricky Exam Question
Sometimes exam questions describe a situation where both demand AND supply shift. This is trickier because the outcome depends on the relative size of each shift. Let's look at the UK labour market as an example.
Real-world example: UK labour market post-Brexit. After Brexit, the supply of workers in sectors like hospitality and logistics fell (many EU workers returned home - supply curve shifts left). At the same time, as the economy recovered from COVID-19, demand for workers increased (firms needed more staff - demand curve shifts right). Both shifts put upward pressure on wages. The effect on the number of workers employed depends on which shift was bigger.
Summary: When both curves shift, one effect is certain and one is uncertain
Both Shifts
Effect on Price
Effect on Quantity
Demand increases + Supply increases
Uncertain (depends on relative size)
Rises
Demand increases + Supply decreases
Rises
Uncertain (depends on relative size)
Demand decreases + Supply increases
Falls
Uncertain (depends on relative size)
Demand decreases + Supply decreases
Uncertain (depends on relative size)
Falls
Worked example: Analysing a Simultaneous Shift in Supply and Demand
In the UK hospitality industry, demand for restaurant meals increased after COVID-19 lockdowns ended. At the same time, the supply of restaurant meals decreased because many chefs had left the industry and food costs had risen sharply. Using a supply and demand diagram, analyse the effect on the equilibrium price and quantity of restaurant meals.
Method: Show both shifts on one diagram, analyse the certain and uncertain outcomes
Demand for restaurant meals increases (pent-up demand after lockdowns). D shifts right to D1. — More consumers want to eat out at every price level.
Supply of restaurant meals decreases (higher costs, fewer chefs). S shifts left to S1. — Restaurants can supply fewer meals at every price level.
Draw original S and D with equilibrium at P1, Q1. Shift D right to D1 and S left to S1. Mark new equilibrium at P2, Q2. — Both shifts are shown on the same diagram with clear labels.
Both shifts push the price upward. Increased demand raises price, and decreased supply also raises price. Therefore, the equilibrium price of restaurant meals DEFINITELY rises from P1 to P2. — When demand increases and supply decreases, both effects push price in the same direction (up), so the price effect is certain.
The demand increase pushes quantity up, but the supply decrease pushes quantity down. The net effect on equilibrium quantity is UNCERTAIN - it depends on which shift is larger. — When the two effects on quantity go in opposite directions, the net result depends on the relative magnitude of each shift.
In practice, UK restaurant prices rose significantly (menu prices up 10-15% in 2022-2023). The number of meals served was roughly similar to pre-pandemic levels, suggesting the demand and supply shifts were of similar magnitude in terms of their effect on quantity. — Using real data strengthens an analytical answer and earns evaluation marks.
Answer: Equilibrium price definitely rises (both shifts push price up). Equilibrium quantity is uncertain - it depends on whether the demand increase or supply decrease is larger. In practice, UK restaurant prices rose sharply while output roughly returned to pre-pandemic levels.
6. Applying Diagrams to Real-World UK Markets
Applying supply and demand analysis to recent UK market changes
UK Market
Recent Change
Curve Affected
Direction of Shift
Effect on Price
Effect on Quantity
Housing (2020-2022)
Remote working + low interest rates
Demand shifts right
D → D1
Price rises (£230k → £290k)
More houses sold
Energy (2022)
War in Ukraine cuts gas supply
Supply shifts left
S → S1
Price rises sharply
Less energy consumed
Electric vehicles (2023)
Government subsidies + new technology
Supply shifts right
S → S1
Price falls
More EVs sold
Fast food labour (2023)
Workers demand higher pay, minimum wage rises
Supply shifts left
S → S1
Wages rise
Fewer hours worked
UK strawberries (2023)
Bad weather + fewer EU pickers
Supply shifts left
S → S1
Price rises
Less available in shops
Notice how the same framework applies to completely different markets - goods, housing, labour, and energy. This is the power of supply and demand analysis. In your exam, you may be asked to apply a diagram to any market. The key is always the same: identify which curve shifts, which direction, and trace through to the new equilibrium.
7. Exam Technique: How to Draw a Perfect Diagram
Follow these steps every time you draw a supply and demand diagram in an exam:
1. Draw large axes - use at least half a page. Label the y-axis 'Price (£)' and the x-axis 'Quantity'.
2. Draw the original supply (S) and demand (D) curves. Label them clearly.
3. Mark the original equilibrium with dotted lines to both axes. Label as P1 and Q1 (or Pe and Qe).
4. If a curve shifts, draw the new curve and label it (D1 or S1). Use an arrow to show the direction of shift.
5. Mark the new equilibrium with dotted lines. Label as P2 and Q2.
6. If asked about revenue, shade the rectangle from origin to Pe and Qe.
7. Write a brief annotation on the diagram explaining the shift (e.g., 'D shifts right due to increased income').
Sources and content standards
Published by Revise Right. Use the official specification reference to check the requirements for your course. Content updated: 2026-03-24.
What happens to price and quantity when demand increases?
When demand increases, the demand curve shifts right and both equilibrium price and equilibrium quantity rise. For example, remote working and low interest rates shifted demand for UK houses right, and average house prices rose from about £230,000 in January 2020 to over £290,000 by mid-2022.
What happens to price and quantity when supply decreases?
When supply decreases, the supply curve shifts left, so equilibrium price rises and equilibrium quantity falls. In 2022-2023, energy prices and the war in Ukraine shifted UK food supply left, and food price inflation reached 19.2% in March 2023.
How do you show revenue on a supply and demand diagram?
Revenue is shown as a shaded rectangle from the origin to the equilibrium price on the y-axis and the equilibrium quantity on the x-axis. Its area is total revenue, TR = P x Q; for example, a price of £12 and quantity of 500 gives £6,000.
What happens when demand increases and supply decreases at the same time?
When demand increases and supply decreases, equilibrium price definitely rises because both shifts push it up. The effect on equilibrium quantity is uncertain, because it depends on whether the demand increase or the supply decrease is larger.
How do you draw a supply and demand diagram in an exam?
Draw large axes labelled Price (£) and Quantity, then the original S and D curves. Mark the original equilibrium with dotted lines to P1 and Q1. For a shift, draw and label the new curve with an arrow, then mark the new equilibrium P2 and Q2.
What causes the demand curve to shift?
The demand curve shifts when a non-price factor changes, such as income, tastes, population or the price of substitutes and complements. An increase in demand shifts the curve right and a decrease shifts it left.
Why did UK house prices rise between 2020 and 2022?
UK house prices rose between 2020 and 2022 because demand increased: remote working, population growth and low interest rates shifted the demand curve right. Average prices rose from about £230,000 in January 2020 to over £290,000 by mid-2022.
Why did UK food prices rise in 2023?
UK food prices rose because supply fell: soaring energy prices, the war in Ukraine and poor harvests in southern Europe shifted the supply curve left. Food price inflation reached 19.2% in March 2023, the highest in over 45 years.
What happens to price and quantity when demand decreases?
When demand decreases, the demand curve shifts left, so both equilibrium price and equilibrium quantity fall. The supply curve does not move.
What happens to price and quantity when supply increases?
When supply increases, the supply curve shifts right, so equilibrium price falls and equilibrium quantity rises. For example, subsidies and new technology increased the supply of electric vehicles, lowering prices and increasing sales.
What happens when supply and demand both increase?
When demand and supply both increase, equilibrium quantity definitely rises, but the effect on price is uncertain. It depends on the relative size of the two shifts.
How did Brexit affect the UK labour market?
After Brexit, the supply of workers in sectors like hospitality and logistics fell as many EU workers returned home, shifting supply left. At the same time demand for workers rose after COVID-19, so both shifts pushed wages up.