Price changes · IGCSE Economics

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Analyse how changes in conditions of supply can affect Only allow one mark for reference to a rise in price and one a firm’s prices. mark for reference to a fall in price. Coherent analysis which might include: MAX 4 marks if not identifying change in conditions of supply.

• Increase in costs of production (1) due to rise in wages / raw material costs / capital goods costs / tariffs (1) raise price (1) to maintain profit (1).
• Natural disasters (1) can create a shortage (1) raise price (1).
• Changes in weather (1) good weather can create a surplus in supply e.g. agriculture (1) prices fall (1) or poor weather can create a shortage (1) prices rise (1)
• Increase in indirect tax / corporate income (corporation) tax (1) a firm may pass this onto consumers as higher prices (1) especially if demand is inelastic (1).
• Government subsidies to firms (1) reduce the cost of production (1) the firm may be able to gain the same revenue and profit (1) with a lower price (1).
• Discovery of new source of raw materials (1) enabling the firm to supply (1) more at a lower price (1).
• Advances in technology (1) example (1) could lower costs of production (1) reducing price (1).
• Improvements in education and training (1) raise productivity (1) lower prices (1). Question Answer Marks Guidance