ACT SSC Economics — Unit 1
Supply and Demand — Flashcards & Quiz
Supply and demand underpin every price in a market economy. ACT SSC Economics Unit 1 expects you to draw and interpret demand and supply curves, distinguish movements along from shifts, and explain equilibrium and disequilibrium. Strong responses apply the model to real markets — housing, labour, petrol — and use accurate diagrams with clearly labelled axes, curves and equilibria.
Key Points
- Law of demand: price down, quantity demanded up (ceteris paribus). Downward-sloping demand curve.
- Law of supply: price up, quantity supplied up. Upward-sloping supply curve.
- Equilibrium: where Qd = Qs. Shortage below, surplus above equilibrium.
- Movement along vs shift: price change = movement; any other factor = shift of the whole curve.
- Demand shifters: income, taste, prices of related goods, expectations, population.
- Supply shifters: input costs, technology, regulation, expectations, number of producers.
Common Mistakes to Avoid
- Confusing a movement along a curve with a shift of the curve.
- Forgetting to label both axes (P vertical, Q horizontal) on every diagram.
- Mixing up substitute and complement effects in demand shifts.
- Saying "price is too high, so demand falls" — that's a movement along, not a demand shift.
- Drawing curves without showing initial and new equilibria clearly.
Exam Strategy
ACT SSC Unit 1 supply and demand questions usually ask you to diagram a market change and explain the effect on price and quantity. Method: (1) identify the market and the change, (2) decide whether it shifts demand, supply or both, (3) draw labelled before-and-after diagrams, (4) state the new equilibrium direction, (5) explain the economic reasoning. Diagrams carry marks — always label axes, curves and equilibria.
Sample Flashcards
Q1: State the law of demand.
The law of demand states that, ceteris paribus (all else equal), as the price of a good rises, the quantity demanded falls, and vice versa. This creates a downward-sloping demand curve.
Q2: State the law of supply.
The law of supply states that, ceteris paribus, as the price of a good rises, the quantity supplied increases, and vice versa. This creates an upward-sloping supply curve.
Q3: List three non-price factors that shift the demand curve.
1) Changes in consumer income. 2) Changes in tastes and preferences. 3) Changes in the price of related goods (substitutes and complements). Other factors include population changes and consumer expectations.
Q4: List three non-price factors that shift the supply curve.
1) Changes in input/production costs. 2) Technological improvements. 3) Government taxes and subsidies. Other factors include number of suppliers, natural conditions and producer expectations.
Sample Quiz Questions
Q1: The law of demand states that as price rises, quantity demanded also rises.
Answer: FALSE
The law of demand states quantity demanded FALLS as price rises, ceteris paribus.
Q2: An increase in consumer income shifts the demand curve for a normal good to the right.
Answer: TRUE
Higher income increases consumers' ability to buy, shifting demand right for normal goods.
Q3: A rise in the price of a good causes the supply curve to shift to the right.
Answer: FALSE
A price change causes movement ALONG the supply curve, not a shift of it. Non-price factors shift the curve.
Revision Tip
Demand and supply shifters and the movement-vs-shift distinction are classic recall — drill them on Revizi and sketch diagrams from memory for exam-speed accuracy.
Related Concepts
Last updated: March 2026 · 4 flashcards · 4 quiz questions