Supply and Demand

Arranged by:

          1. Adinda Rizqu Purwanti

Nim : 19080694083
2. Ilham Amanatulloh
Nim : 19080694086
3. Fernando Yorhans soetomo
Nim : 19080694092
4. Zalza berlinda pratiwi
Nim : 19080694104
5. Zefanya Tribrata Cut Damcha
Nim : 19080694113
 

JURUSAN AKUNTANSI

FAKULTAS EKONOMI

UNIVERSITAS NEGERI SURABAYA

2019
 PREFACE

Praise be to God Almighty for the blessing of his grace, and that we were given the oppoturnity to be able
to compile a working paper entitled "Supply and Demand" is properly and correctly, and on time

This paper is structured so that readers can know about supply and demand. This paper was compiled
with help from various parties. Both parties come outside as well as from parties concerned itself. And
because the aid and help of God Almighty, these papers can be finally resolved.

The compilers also thanked to Mrs. Insyirah as the lecturer of economics course. Who have help us to
compilers in order to complete this paper

Hopefully this paper can give a broader insight to the reader. Although this paper has advantages and
disanvantages. Thankyou

 
 
 
 
 
 
 
 
 

Author

10 September 2019

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 Table of Contens

PREFACE .......................................................................................................................... i
Table of Contens ............................................................................................................... ii
CHAPTER I ...................................................................................................................... 1
INTRODUCTION..............................................................................................................1
1.1 Background of the paper ................................................................................................1
1.2 Problem formulation ......................................................................................................1
1.3 Purpose of the paper.......................................................................................................1
CHAPTER II ......................................................................................................................2
THEORY and DISCUSSION ...........................................................................................2
2.1 Concept Supply and Demand for Economy...................................................................2
A. Demand .....................................................................................................2
B. Supply ........................................................................................................3
2.2 Law Of Supply and Law Of Demand ............................................................................3
2.3 Factors That Affecting Demand.....................................................................................5
2.4 Factors That Affecting Supply .......................................................................................5 
CHAPTER III ....................................................................................................................7
CONCLUSION ..................................................................................................................7
BIBILIOGRAPHY ............................................................................................................8
 

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 CHAPTER I

INTRODUCTION

1.1. Background of the paper

One of the most fundamental basics of micro-economics is the supply and demand of services or
products of a given nature. Despite its frequent use, the analysis of the supply and demand of the
products in the market provides a very basic understanding of the market nature and what should
be done to promote either of the factors when it is down.

In every product that is in the market, one way or another there must be a substitute which is
called competitor in the market and a complements which works together with the product, the
most typical example of a complement is the ink of a biro pen, if you can buy a biro then you
ought to afford the ink for the biro just like the case of a car and fuel, they are complements of
each other even though they don’t have a direct relationship. The changes in the prices of one
product can have some effects on the prices of its complements.

On the other hand, substitute products have a direct relationship because one can be replaced for
the other. This effect is the genesis of the marketing strategies that we witness in the modern
world. Increase in marketing strategies has been largely contributed by the increases in the
number of the substitute products available in the market.

In essence, the higher the demand of a certain commodity or services, the higher the number of
competitors in the market fighting for the commodity or the services by supplying the need to the
market. This analysis is going to discuss the demand and the supply of a commodity which is the
computer in this case.

1.2 Problem Formulation

1) What is the definition of demand and supply?

2) How is the law of demand and supply?
3) What are the factors that affect demand and supply?

1.3 Purpose of the paper

1) To understand the definition of demand and supply

2) To understand about the law of demand and supply’
3) To know the factors that affect demand and supply

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 CHAPTER II

THEORY and DISCUSION

2.1 Concept Supply and Demand for Economy

The theory of supply and demand in economics, is a description of the relationships in the
market, between potential buyers and sellers of an item. The supply and demand model is used to
determine the price and quantity sold in the market. This model is very important for conducting
microeconomic analysis of the behavior and interactions of buyers and sellers. It is also used as a
starting point for various economic models and theories. This model estimates that in a
competitive market, price will function as a counterweight between the quantity demanded by
consumers and the quantity offered by producers, so that an economic balance is created between
price and quantity. This model accommodates the possibility of factors that can change the
balance, which will then be displayed in the form of a shift from demand or supply. There are
two words that cannot be separated from economics. The two words are demand (demand) and
supply (supply). Demand and supply are from two different parties. Demand comes from
consumers while supply comes from producers. In the market, these two things that have
opposite interests will interact with each other The seller has the goal to sell goods or services in
as many quantities as possible at the highest possible price. He will do everything possible to get
the maximum benefit. Instead the buyer wants the lowest possible price, but he also wants to get
as many goods or services as possible.

A. Demand

Demand is the rate at which consumers want to buy a product. Economic theory holds that demand
consists of two factors: taste and ability to buy. Taste, which is the desire for a good, determines the
willingness to buy the good at a specific price. Ability to buy means that to buy a good at specific price,
an individual must possess sufficient wealth or income. Both factors of demand depend on the market
price. When the market price for a product is high, the demand will be low. When price is low, demand is
high. At very low prices, many consumers will be able to purchase a product. However, people usually
want only so much of a good. Acquiring additional increments of a good or service in some time period
will yield less and less satisfaction. As a result, the demand for a product at low prices is limited by taste
and is not infinite even when the price equals zero. As the price increases, the same amount of money will
purchase fewer products. When the price for a product is very high, the demand will decrease because,
while consumers may wish to purchase a product very much, they are limited by their ability to buy. The
curve in Figure 1 shows a generalized relationship between the price of a good and the quantity which
consumers are willing to purchase in a given time period. This is known as a simple demand curve.

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 Figure 1 : demand curve
This curve shows the rate at which consumers wish to purchase a product at a given price.
The simple demand curve seems to imply that price is the only factor which
affects demand. Naturally, this is not the case. Recall the assumption made by
economists that the other factors which influence changes in demand act over a much
larger time frame. These factors are assumed to be constant over the time period in which price
causes supply and demand to stabilize.

B. Supply

Supply is defined as how much of a good or service is offered at each price. Willingness
and ability to supply goods determine the sellers actions. At higher prices, more of the
commodity will be available to the buyers. This is because the suppliers will be able to maintain
a profit despite the higher costs of production that may result from short-term expansion of their
capacity.
In a real market, when the inventory is less than the desired inventory, manufacturers will
raise both the supply of their product and its price. The short-term increase in supply causes
manufacturing costs to rise, leading to a further increase in price. The price change in turn
increases the desired rate of production. A similar effect occurs if inventory is too high. Classical
economic theory has approximated this complicated process through the supply curve. The
supply curve shown in figure 2 slopes upward because each additional unit is assumed to be
more difficult or expensive to make than the previous one, and therefore requires a higher price to
justify its production.

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Figure 2: Supply Curve
At high prices, there is more incentive to increase production of a good. This graph represents the short‐term 
approximation of classical economic theory. 
 

2.2 Law Of Supply and Law Of Demand

 Law of supply explains the relationship between price and the quantity supplied. If an
object’s price on the market increases, the producers would be willing to supply more of
the product. If the object’s price on the market decreases, they are less willing to supply a
lot and the quantity decreases.

An economic law stating that as the price of a good or service increases, the quantity
supplied increases, and vice versa. In other words the law that states that as price goes up,
the quantity supplied goes up (and vice versa); direct relationship
 Law of demand explains the relationship between between price and quantity demanded.
If an object’s price on the market increases, less people will want to buy them because it
is too expensive. If the object’s price on the market decreases, more people will want to
buy them because they are cheaper.

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An economic law stating that as the price of a good or service increases, the quantity demanded
decreases, and vice versa. In other words the law that states that as price goes up, the quantity
demanded goes down (and vice versa); inverse relationship.

2.3 Factors That Affecting Demand

1) Price
One of the factor that affect demand is “The Price”. If the price of an item rises, the
demand for that item will decrease. Otherwise, if the price of an item decrease, the
demand for that item will increase. How does it happen? It happens because most people
don’t like something that has a high price / expensive.
2) Income
Beside of that, there is another factor in addition to price that affect demand. Yes,
Income. How does income affect demand? if the income of the buyer or consumer
increase, the demand for an item will increase. Otherwise, if the income of the buyer /
consumer decrease, the demand for an item will decrease as well.
3) The Intensity of Needs
The intensity of needs is urgent need for an item or the most needed needs. If the need for
and item is urgent or very important, the demand for that item will also be high.
4) Customer Tastes or Preference
If the consumer's taste for an item is rising, the demand for an item also rises. for
example, lately bomber jacket has a lot of fans, so the demand for bomber jacket will
increase too. and vice versa.
5) Buyers’ Expectation About Future Prices
If consumers expect prices to increase, they buy more of a product now. On the other
hand, if consumers expect a product to go on sale soon, they delay their purchases.

2.4 Factors That Affecting Supply

1) Price
There is a direct relationship between the price of a product and its supply. If the price of
a product increases, then the supply of the product also increases and otherwise, if the
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 price of a product decreases, then the supply of the product also decreases. For example,
if the price of the shampoo increases from Rp14.000 to Rp15.500 then the stock of the
items to be offered will increase.
2) Cost of Production
Costs that used in the production process such as costs that used to purchase raw
materials, costs to pay employees, costs to buy supporting materials, and etc., also affect
the price of an item. If the costs of production are high, then the price of manufactured
items will soar and fewer items will be offered.
3) Speculation About Future Price
If the producers estimates that the price of items or services will increase, while the
income of the people don’t change, the producers will reduce the amount of items and
services that will be offered later. They may increase their production to earn higher
profits in the future and as a result the supply increases.
4) Technology
When there is a technological progress in the production methods, producers become
more productive. Beside of that, technology makes it easy for producers to produce items.
As a result, producers can produce more items, and the supply increases.
5) Tax
tax is also one of the factors that can affect the offered price of a product. If the tax on an
item is high, the price of that item will also be high. As a result, the demand for an item
will decrease, which causes the supply of an item to also decrease.

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 CHAPTER III
CONCLUSION

Demand is the number of items purchased or requested at a certain price and time. While the
definition of supply is a number of goods sold or offered at a certain price and time. If all
assumptions are ignored (ceteris paribus): If the price is cheaper then the demand or buyer will
be more and vice versa. If the price is lower / cheaper then the supply will be less and vice versa
Demand and supply have several factors that can cause demand and supply to fall or rise.

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BIBILIOGRAPHY

Chron. “Supply and Demand”.  https://smallbusiness.chron.com/four‐factors‐cause‐shift‐demand‐
  56212.html. Accessed on Sept 10th 2019 07:45 PM 
Econprojectsd. “Supply and Demand”. https://econprojectsd.weebly.com/law‐of‐supply‐and‐law‐of‐
  demand.html. Accessed on Sept 10th 2019, 08:55 PM 
Ivypanda. “Supply and Demand”. https://ivypanda.com/essays/supply-and-demand-paper/ . Accessed on 
  Sept 10th 2019, 08:58 PM 

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