Exam tip 1
Draw the surplus as a horizontal gap between the two curves at the higher price, and label it. Then add an arrow down the vertical axis to show the price falling. The diagram does half the explaining.
2281 · 2.5
Price determination — common mistakes
Common exam mistakes on 2281 Price determination. Learn what loses marks, then practise the topic with Examiner’s Ink.
Exam tip 2
Paper 1 tests equilibrium with a schedule and asks which price gives a shortage or a surplus. Compare the two quantity columns row by row: demand bigger = shortage, supply bigger = surplus.
Why is the equilibrium price the only price that lasts?
At any higher price a surplus builds up and sellers cut prices; at any lower price a shortage appears and sellers raise them. Only at equilibrium is there no surplus or shortage, so no reason for price to change.
Is a surplus the same as excess supply?
Yes. Both mean that at the current price the quantity supplied exceeds the quantity demanded. A shortage and excess demand are likewise the same thing.
What if the schedule has no row where the quantities are equal?
The equilibrium lies between the last price with a shortage and the first with a surplus. State the two prices it lies between, or draw the curves and read the intersection.