UWIN PIE02 s26

Course : Pengantar Ilmu Ekonomi (1506PIE02)
online.uwin.ac.id
Bachelor in Economics (S.E): Manajemen
UWIN eLearning Program
Session Topic : The Market Forces of

Supply and Demand
Course: Pengantar Ilmu Ekonomi
By Tovan Krisdianto, S.E., M.M.
Content
Part 1
Markets
Part 2
Demand
Part 3
Ceteris Paribus
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S.3
Part1: Markets
Markets: Supply & Demand
The Market Forces of Supply and Demand

Supply and demand are the,
two words that economists use most often.
forces that make market economies work.
Modern microeconomics is about,

1. Supply,
2. Demand, and
3. Market equilibrium.
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Markets: Definition
A market
Defn: A group of buyers and sellers of
a particular good or service.
The terms supply and demand refer to,

the behavior of people . . .
as they interact with one another
in markets.
Buyers determine demand

Sellers determine supply
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Markets: Type
Market Type: A Competitive Market

A Competitive Market
Defn: A market,
with many buyers and sellers.
that is not controlled by any one person.
in which a narrow range of prices are established
that buyers and sellers act upon.
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S.7
Markets: Competition
Competition:
1. Perfect and
2. Otherwise
a. Perfect Competition
1. Products are the same
2. Numerous buyers and sellers so that each has no influence
over price
3. Buyers and Sellers are price takers
b. Monopoly
One seller, and seller controls price
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Markets: Competition (cont.)
c. Oligopoly
1. Few sellers
2. Not always aggressive competition
d. Monopolistic Competition
1. Many sellers
2. Slightly differentiated products
3. Each seller may set price for its own product
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Part2: Demand
Demand: Quantity, Law & Schedule
Quantity Demanded
Defn: The amount of a good that buyers are willing and able
to purchase.
Law of Demand
The law of demand states that there is an inverse relationship
between price and quantity demanded.
Demand Schedule
Defn: A table that shows the relationship between the price of
the good and the quantity demanded.
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Demand: Example
Demand Schedule
No Price of Ice-Cream Quantity of Cones
Cone
Demanded
1.
$ 0.00
12
2.
3.
4.
0.50
1.00
1.50
10
8
6
5.
6.
2.00
2.50
4
2
7.
3.00
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Demand: Determinants & Curve
Determinants of Demand
1. Market price
2. Consumer income
3. Prices of related goods
4. Tastes
5. Expectations
Demand Curve
Defn: the downward-sloping line
relating price to quantity demanded.
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Demand: Catherines Demand Schedule and Demand Curve
Price of
Ice-Cream Cone
$3.00
2.50
1. A decrease 2.00
in price
1.50
1.00
0.50
0 1 2 3 4 5 6 7 8 9 10 11 12
2. increases quantity
of cones demanded.
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Quantity of
Ice-Cream
Cone
S.14
Part3: Ceteris Paribus
Ceteris Paribus: Definition
Ceteris Paribus
Defn:
A Latin phrase that means all variables other than
the ones being studied are assumed to be constant.
Literally, Ceteris Paribus means other things being equal.
Q: Why the demand curve slopes downward?
A: Because,
ceteris paribus,
lower prices imply a greater quantity demanded!
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Market Demand: Definition
Market Demand refers to,

the sum of all individual demands for a particular good or
service.
Graphically, individual demand curves are summed
horizontally to obtain the market demand curve.
Change in Quantity Demanded versus Change in Demand
Change in Quantity Demanded,
Movement along the demand curve.
Caused by a change in the price of the product.
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Market Demand: Changes in Quantity Demanded
Price of
Cigarettes
per Pack
A tax,
that raises the price of
cigarettes results in
a movement along the
demand curve.
C
$4.00
2.00
D1
12
20
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Number of Cigarettes
Smoked per Day
S.18
Market Demand: Changes in Quantity Demanded (cont.)
Change in Demand
A shift in the demand curve, either to the left or right.
Caused by a change in a determinant other than the price.
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S.19
Market Demand: Changes in Demand
Price of
Ice-Cream
Cone
Increase in
demand
Decrease in
demand
D2
D3
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D1
Quantity of
Ice-Cream
Cones
S.20
Consumer Income: Illustration
As income increases the demand,

1. for a normal good will increase.
2. for an inferior good will decrease.
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Consumer Income: Normal Good
Price of
Ice-Cream
Cone
$3.00
An increase
in income
2.50
Increase in
Demand
2.00
1.50
1.00
0.50
D2
D1
0
4 5
9 10 11 12
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Quantity of
Ice-Cream
Cones
S.22
Consumer Income: Inferior Good
Price of
Ice-Cream
Cone
$3.00
2.50
An increase
in income
2.00
Decrease in
Demand
1.50
1.00
0.50
D2
0
4 5
D1
8
9 10 11 12
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Quantity of
Ice-Cream
Cones
S.23
Prices of Related Goods: Substitutes & Complements
When a fall in the price of one good,

a. reduces the demand for another good, the two goods are called
substitutes.
b. increases the demand for another good, the two goods are called
complements.
Table 1 Variables that Influence Buyers
No
Variables that Affect

Quantity Demanded
A Change in This Variable
1. Price
Represents a movement along the demand curve
2. Income
Shifts the demand curve
3. Prices of related goods
4. Tastes
5. Expectations
6. Number of buyers
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S.24
Reference
1. Mankiw (2004) The Market Forces of Supply and

Demand. Web: mankiw.swlearning.com.
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S.25
Course : Pengantar Ilmu Ekonomi (1506PIE02)
online.uwin.ac.id
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- 1506PIE02-
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Course : Pengantar Ilmu Ekonomi (1506PIE02)

UWIN eLearning Program

Session Topic : The Market Forces of

Markets: Supply & Demand

The Market Forces of Supply and Demand

Modern microeconomics is about,

The terms supply and demand refer to,

Buyers determine demand

Market Type: A Competitive Market

Markets: Competition (cont.)

Demand: Quantity, Law & Schedule

Demand: Determinants & Curve

Demand: Catherines Demand Schedule and Demand Curve

Part3: Ceteris Paribus

Ceteris Paribus: Definition

Market Demand: Definition

Market Demand refers to,

Market Demand: Changes in Quantity Demanded

Market Demand: Changes in Quantity Demanded (cont.)

Market Demand: Changes in Demand

Consumer Income: Illustration

As income increases the demand,

Consumer Income: Normal Good

Consumer Income: Inferior Good

Prices of Related Goods: Substitutes & Complements

When a fall in the price of one good,

Variables that Affect

A Change in This Variable

Represents a movement along the demand curve

Shifts the demand curve

3. Prices of related goods

Shifts the demand curve

Shifts the demand curve

Shifts the demand curve

Shifts the demand curve

1. Mankiw (2004) The Market Forces of Supply and

Course : Pengantar Ilmu Ekonomi (1506PIE02)

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