DEMAND, SUPPLY AND EQUILIBRIUM

Permintaan, Penawaran dan Kesetimbangan

law of Demand

If the price of a good decrease, then the demand for these goods will increase, whereas if the price of a good rises, the demand for such goods would be reduced "asumsi Ceteris Paribus

Hukum Permintaan

Jika harga suatu barang turun, maka permintaan terhadap barang tersebut akan bertambah, sebaliknya jika harga suatu barang naik, maka permintaan terhadap barang tersebut akan berkurang” asumsi Ceteris Paribus

Ceteris paribus (other things being

equal)

The price of other goodsincome communities

consumer tastesTotal population

Forecasting the futurepromotional company

Ceteris paribus (Hal-Hal lain yang dianggap tetap)

Harga barang lain Pendapatan

masyarakat Selera konsumen Jumlah penduduk Ramalan dimasa yang

akan datang Promosi perusahaan

(Demand Schedule)

A tabulation of figures showing the number of goods / services which are required at various levels / rates.

Skedul Permintaan

Merupakan tabulasi angka-angka yang menunjukkan jumlah barang / jasa yang diminta pada berbagai tingkat / harga.

Demand SchedulePrice Amount

6 4

5 5

4 6

3 7

2 8

Demand Function

Is a mathematical relationship between the variables affected and affecting.

function is a demand Qdx = f (Px)

Qdx: X number of items requestedPx: price of goods X

Fungsi Permintaan

Sedan Car demand function:Qdx = 200 - 10P

Make a demand schedule Sedan Car

Draw the demand curve Sedan Car

Factors that affect the demand

a. The price of other goodsb. income communitiesc. public tasted. Company promotione. natural conditionsf. Total populationg. Forecast future

Shows that the increase or

decrease in demand for goods caused by changes in the price

of the goods themselves.

Throughout the movement of Demand Curve

Px

Qx

A

B

C

Dx

5

4

3

2

1

0 60 10020 40 80 120 140

Shifting of Demand Curve

(Px)

A1

B1

Dx

5

4

3

2

1

0 60 10020 40 80 120 140

A

B

Dx1

(Qx)

Rp

Indicate changes in demand for goods caused by changes in factors beyond the price of the goods themselves.

A product if the price is sold Rp. 100 from 10 units, and if the price is 75 from 20 units. Determine the demand function and graphed

11

Example

m = y2-y1/x2-x1 = (20-10) / (75-100) = 10/-25 = 2/-5c = (m * –x1) + y1 = 2/-5 * -100 + 10 = 40+ 10 = 50Qx = 50 – 2/5 Px

0,125

50,0

Q

P

Exceptions to the Law of Demand

.a. Given case for inferior goodsb. Speculation casec. Case goods presticed. false cases

Supply

Factors affecting supply:

a. the price of the goods themselvesb. the price of other goodsc. the cost to acquire the factors of productiond. technology usede. government intervention, including taxesf. objectives of the companyg. natural conditions

Supply Schedule

Is a tabulation of numbers showing quantity of product/service offered on various price rate. The Character of relation between price and number of product offered is linear.

Supply Shedule

Price Quantity

1 3

2 4

3 5

4 6

5 7

If the X product rise increase, the quantity of product X offered will also increase and vice versa.

Supply Curve

3

4

5

6

7

1

2

0 1 2 3 4 5 6 7 8

F

PxSx

Qx

E

A

B

C

D

Supply function

Supply function basically shows mathematic relation between price and number of product offered. A simple supply function is: Qsx = f (Px) in which : Qsx : quantity of productX offered Px : price of product X

Sedan Car Supply function

Qs = -40 + 5P

Make a supply schedule of sedan car

Make a supply curve of the sedan car

Indicates supply rise or inclination of a product caused by the change of product’s price

Movement Along Supply Curve

5

4

3

2

1

40 60 1000 20 80 120 140

(Px)

(Qx)

Sx

A

B

C

Rp

Indicates a change towards a product caused by the changing factors outside the product’s price

Supply Curve Shifting

40 60 10020 80 120 140

5

4

3

2

1

Rp

(Px)

(Qx)

SxSx1

0

A B

If the product price is IDR 500 sold 60 units and if the price is IDR 700 sold 100 unitsDefine the supply function and the graphicP1 = Rp 500 , Q1 = 60 ; P2 = Rp. 700, Q2 = 100m = Q2 – Q1 / P2-P1 = (100-60)/(700-500) = 40/200Q = m X – mX1 + Q1 = 4/20X – 4/20 500 + 60 = 1/5P - 40

Case : Supply function

0,200

Q=1/5P -40

Q

P

Market Equilibrium

Happens when in a certain price rate, the amount of demand is the same with the amount of supply in the market. This condition can be shown trough demand and supply schedule, demand and supply function and demand and supply curve.

Market Equilibrium

0 5040302010

5

4

3

2

1

Px

Qx

Sx

Dx

Market EquilbriumDemand: Qd = 200 – 10P

Supply: Qs = -40 + 5PQs, Qd = thousand unit per year

P = dozen million rupiah per unit

Define the cost and total of market equilibrium.

What will happen if the car price is set at IDR 150 million?

What will happen if the car price is set at Idr 170 million?

Changes in Equilibrium

1If the demand increases 2If the demand decreases 3If the supply increase 4If the supply decreases

EXERCISE

SEDAN CAR MARKET CASEDemand Qd = 200 – 10 P

Supply Qs = -40 + 5 PHow much is the cost and quantity equilibrium

If it is set that the car price is IDR 150 million, apa what will happen to the market equilibrium of the

sedan car market?Remark: Qd, Qs = thousand unit per month

p = dozen million rupiah per unit

EXERCISE

GABAH MARKET CASEDemand of gabah di Malang Qd = 2000 – 3 P

Supply Qs = -500 + 2 PHow much is the cost and quantity equilibrium of

gabah?If the government set gabah basic price IDR

600.000/ton, what will happen to the market equilibrium of gabah?

Remark: Qs, Qd = thousand ton per season p = hundred thousand rupiah per ton

PROBLEMS

1. Explain the following`statements, using the supply and demand diagrams:

Since drinking coffee in cafes has become fashionable among adults, the price of a cup

of coffee has risen.It has been such a mild summer, the

electrical retailers are having cut price sales to reduce their stocks of fans and air

conditioners.

c. Floods in Bojonegoro, Ngawi and Solo have led to an increase in the price of rice

all around Midle of Java.2. For each of the following markets, indicate whether the stated change causes a shift of

the supply curve, a shift of the demand curve, a movement along the supply curve or a movement along the demand curve.The hausing market: Consumers income

increaseThe domestic air travel market: a major

carrier goes out of business.

c. The computer market: the price of broadband falls.

d. The milk market: the price of milk increase and the amount of milk people are

willing to buy declines.e. The fast-food market: the number of fast-

food restaurants in the area increases.f. The video rental market: the number of

consumers in the area decreases.

3. Draw a supply and demand diagram for each of the following changes in the bicycle

market and show what happens.Inline skates replace bicycles as the most popular form of transportation for young

people.Income of people who like to ride bicycles

increase.Technology for producing bicycles

improves.The cost of the metal alloy used in

producing bicycles increases.