Tugas Hidrologi Tambang 2

MARKET MECHANISM
SUPPLY AND DEMAND
© 2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
The Basic Decision-Making Units
• A firm is an organization that transforms

resources (inputs) into products (outputs).
Firms are the primary producing units in a
market economy.
• An entrepreneur is a person who organizes,
manages, and assumes the risks of a firm,
taking a new idea or a new product and
turning it into a successful business.
• Households are the consuming units in an
economy.
The Circular Flow of Economic Activity
• The circular flow of

economic activity shows
the connections between
firms and households in
input and output markets.
Input Markets and Output Markets
• Output, or product,
markets are the markets
in which goods and
services are exchanged.
• Input markets are the

markets in which
resources—labor, capital,
• Payments flow in the opposite and land—used to
direction as the physical flow of produce products, are
resources, goods, and services
(counterclockwise). exchanged.
Input Markets
Input markets include:

• The labor market, in which households supply
work for wages to firms that demand labor.
• The capital market, in which households supply
their savings, for interest or for claims to future
profits, to firms that demand funds to buy capital
goods.
• The land market, in which households supply
land or other real property in exchange for rent.
The Basics of Supply and Demand
Supply-demand analysis is a fundamental and powerful

tool that can be applied to a wide variety of interesting
Chapter 2 The Basics of Supply and Demand
and important problems. To name a few:

• Understanding and predicting how changing world economic
conditions affect market price and production
• Evaluating the impact of government price controls, minimum
wages, price supports, and production incentives
• Determining how taxes, subsidies, tariffs, and import quotas
affect consumers and producers
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Microeconomics • Pindyck/Rubinfeld, 8e. 6 of 52
SUPPLY AND DEMAND
The Demand Curve

● demand curve Relationship between the quantity of a good
that consumers are willing to buy and the price of the good. QD  QD (P)
Figure 2.2
The Demand Curve

The demand curve, labeled D,

shows how the quantity of a good
demanded by consumers depends
on its price. The demand curve is
downward sloping; holding other
things equal, consumers will want
to purchase more of a good as its
price goes down.
The quantity demanded may also
depend on other variables, such
as income, the weather, and the
prices of other goods. For most
products, the quantity demanded
increases when income rises.
A higher income level shifts the
demand curve to the right (from D
to D’).
Determinants of Household Demand
A household’s decision about the quantity of a particular

output to demand depends on:
• The price of the product in question.
• The income available to the household.
• The household’s amount of accumulated wealth.
• The prices of related products available to the
household.
• The household’s tastes and preferences.
• The household’s expectations about future
income, wealth, and prices.
Quantity Demanded
• Quantity demanded is the amount

(number of units) of a product that a
household would buy in a given time
period if it could buy all it wanted at
the current market price.
Demand in Output Markets
ANNA'S DEMAND
• A demand schedule
SCHEDULE FOR is a table showing
TELEPHONE CALLS how much of a given
QUANTITY product a household
PRICE DEMANDED
(PER (CALLS PER would be willing to
CALL) MONTH) buy at different prices.
$ 0 30
0.50 25
3.50 7 • Demand curves are
7.00 3 usually derived from
10.00 1
15.00 0 demand schedules.
The Demand Curve
ANNA'S DEMAND
SCHEDULE FOR
• The demand curve is
TELEPHONE CALLS a graph illustrating
PRICE
QUANTITY
DEMANDED
how much of a given
(PER
CALL)
(CALLS PER
MONTH)
product a household
$ 0 30 would be willing to
0.50 25
3.50 7 buy at different prices.
7.00 3
10.00 1
15.00 0
The Law of Demand
• The law of demand

states that there is a
negative, or inverse,
relationship between
price and the quantity
of a good demanded
and its price.
• This means that
demand curves slope
downward.
Income and Wealth
• Income is the sum of all households

wages, salaries, profits, interest
payments, rents, and other forms of
earnings in a given period of time. It is
a flow measure.
• Wealth, or net worth, is the total value

of what a household owns minus what
it owes. It is a stock measure.
Related Goods and Services
• Normal Goods are goods for which

demand goes up when income is
higher and for which demand goes
down when income is lower.
• Inferior Goods are goods for which
demand falls when income rises.
Related Goods and Services
• Substitutes are goods that can serve as

replacements for one another; when the
price of one increases, demand for the
other goes up. Perfect substitutes are
identical products.
• Complements are goods that “go

together”; a decrease in the price of one
results in an increase in demand for the
other, and vice versa.
Shift of Demand Versus Movement Along a
Demand Curve
• A change in demand is
not the same as a change
in quantity demanded.
• In this example, a higher
price causes lower
quantity demanded.
• Changes in determinants
of demand, other than
price, cause a change in
demand, or a shift of the
entire demand curve, from
DA to DB.
A Change in Demand Versus a Change in
Quantity Demanded
• When demand shifts to

the right, demand
increases. This causes
quantity demanded to be
greater than it was prior to
the shift, for each and
every price level.
A Change in Demand Versus a Change in
Quantity Demanded
To summarize:
Change in price of a good or service
leads to
Change in quantity demanded

(Movement along the curve).
Change in income, preferences, or

prices of other goods or services
leads to
Change in demand
(Shift of curve).
The Impact of a Change in Income
• Higher income • Higher income

decreases the demand increases the demand
for an inferior good for a normal good
The Impact of a Change in the Price
of Related Goods
• Demand for complement good
(ketchup) shifts left
• Demand for substitute good (chicken)

shifts right
• Price of hamburger rises

• Quantity of hamburger
demanded falls
From Household to Market Demand
• Demand for a good or service can be

defined for an individual household, or
for a group of households that make up a
market.
• Market demand is the sum of all the

quantities of a good or service demanded
per period by all the households buying in
the market for that good or service.
From Household Demand to Market
Demand
• Assuming there are only two households in the

market, market demand is derived as follows:
SUPPLY AND DEMAND
The Supply Curve

● supply curve Relationship between the quantity of a good
that producers are willing to sell and the price of the good. QS  QS ( P)
Figure 2.1
The Supply Curve

The supply curve, labeled S in

the figure, shows how the
quantity of a good offered for
sale changes as the price of the
good changes. The supply
curve is upward sloping: The
higher the price, the more firms
are able and willing to produce
and sell.
If production costs fall, firms

can produce the same quantity
at a lower price or a larger
quantity at the same price. The
supply curve then shifts to the
right (from S to S’).
Supply in Output Markets
CLARENCE BROWN'S • A supply schedule is a table

SUPPLY SCHEDULE showing how much of a product
FOR SOYBEANS
firms will supply at different
QUANTITY
SUPPLIED prices.
PRICE (THOUSANDS
(PER
BUSHEL)
OF BUSHELS
PER YEAR)
• Quantity supplied represents the
$ 2 0 number of units of a product that
1.75 10
2.25 20
a firm would be willing and able to
3.00 30 offer for sale at a particular price
4.00 45 during a given time period.
5.00 45
The Supply Curve and
the Supply Schedule
• A supply curve is a graph illustrating how much

of a product a firm will supply at different prices.
CLARENCE BROWN'S
Price of soybeans per bushel ($)

6
SUPPLY SCHEDULE
FOR SOYBEANS 5
QUANTITY
SUPPLIED
4
PRICE (THOUSANDS
3
(PER OF BUSHELS
BUSHEL) PER YEAR) 2
$ 2 0
1.75 10 1
2.25 20
3.00 30 0
4.00 45
5.00 45 0 10 20 30 40 50
Thousands of bushels of soybeans
produced per year
The Law of Supply
• The law of supply

Price of soybeans per bushel ($)
6
5 states that there is a
4 positive relationship
3
between price and
2
1
quantity of a good
0
supplied.
0 10 20 30 40 50
Thousands of bushels of soybeans • This means that
produced per year
supply curves
typically have a
positive slope.
Determinants of Supply
• The price of the good or service.

• The cost of producing the good, which in
turn depends on:
• The price of required inputs (labor,
capital, and land),
• The technologies that can be used to
produce the product,
• The prices of related products.
A Change in Supply Versus
a Change in Quantity Supplied
• In this example, a higher

price causes higher
quantity supplied, and
a move along the
supply curve.
• In this example, changes in determinants of supply, other
than price, cause an increase in supply, or a shift of the
entire supply curve, from SA to SB.
• When supply shifts

to the right, supply
increases. This
causes quantity
supplied to be
greater than it was
prior to the shift, for
each and every price
level.
To summarize:
Change in price of a good or service
leads to
Change in quantity supplied

(Movement along the curve).
Change in costs, input prices, technology, or prices of

related goods and services
leads to
Change in supply
(Shift of curve).
From Individual Supply
to Market Supply
• The supply of a good or service can be defined

for an individual firm, or for a group of firms that
make up a market or an industry.
• Market supply is the sum of all the quantities of

a good or service supplied per period by all the
firms selling in the market for that good or
service.
Market Supply
• As with market demand, market supply is the

horizontal summation of individual firms’ supply
curves.
Market Equilibrium
• The operation of the market

depends on the interaction
between buyers and sellers.
• An equilibrium is the condition

that exists when quantity supplied
and quantity demanded are equal.
• At equilibrium, there is no tendency

for the market price to change.
Market Equilibrium
• Only in equilibrium is
quantity supplied
equal to quantity
demanded.
• At any price level
other than P0, the
wishes of buyers
and sellers do not
coincide.
THE MARKET MECHANISM
Supply and Demand
The market clears at price P0

and quantity Q0.
At the higher price P1, a surplus

develops, so price falls.
At the lower price P2, there is a

shortage, so price is bid up.
Market Disequilibria
• Excess demand, or
shortage, is the condition
that exists when quantity
demanded exceeds
quantity supplied at the
current price.
• When quantity demanded
exceeds quantity
supplied, price tends to
rise until equilibrium is
restored.
Market Disequilibria
• Excess supply, or
surplus, is the condition
that exists when quantity
supplied exceeds quantity
demanded at the current
price.
• When quantity supplied
exceeds quantity
demanded, price tends to
fall until equilibrium is
restored.
CHANGES IN MARKET EQUILIBRIUM
Figure 2.4
New Equilibrium Following
Shift in Supply
When the supply curve

shifts to the right, the
market clears at a lower
price P3 and a larger
quantity Q3.
CHANGES IN MARKET EQUILIBRIUM
Figure 2.5
New Equilibrium Following
Shift in Demand
When the demand curve

shifts to the right,
the market clears at a
higher price P3 and a
larger quantity Q3.
Increases in Demand and Supply
• Higher demand leads to • Higher supply leads to

higher equilibrium price and lower equilibrium price and
higher equilibrium quantity. higher equilibrium quantity.
Decreases in Demand and Supply
• Lower demand leads to • Lower supply leads to

lower price and lower higher price and lower
quantity exchanged. quantity exchanged.
Relative Magnitudes of Change
• The relative magnitudes of change in supply and

demand determine the outcome of market equilibrium.
Relative Magnitudes of Change
• When supply and demand both increase, quantity

will increase, but price may go up or down.
Mineral Supply and Demand
From 1945 to 1975, there was a constant growth
in the world-wide demand for metals
The increase in demand ranged from 2% to 10%
per year
From 1976 to 1982 there actually was a world-
wide decrease in demand for metals (as the
world reeled in shock from increased oil prices)
Ore Deposits
So, mining an ore is a
matter of economics
(mines that do not make
money, fail!)
If demand climbs and
prices rise in response,
additional not-so-rich ore
deposits may become
economical to mine
And a fall in demand or
prices will cause marginal
mines to close
World Supply and Demand
World Supply and Demand
As current mineral reserves are depleted, the
law of supply and demand will drive up the price
This will allow currently uneconomical and
marginal deposits to become profitable to mine
As we begin to mine lower and lower grades of
ore, more rock will have to be processed and
more land will have to be disturbed
Future Demand
In theory, one way to extend nonrenewable
resources would be to reduce consumption, or
at least hold consumption steady
In practice, this is very unlikely, either in the
industrialized or developing nations
The more likely scenario is that high technology
will be applied to finding and extracting new
resources
Homework
1. Pernyataan:
Jumlah komoditi yang tersedia dan dapat dibeli
selama periode tertentu merupakan fungsi dari
harga komoditi, pendapatan, harga komoditi
pesaing, dan selera pembeli.
a. Nyatakan kalimat di atas secara matematis yang
sederhana serta berikan ulasannya
b. Berikan ulasan yang serupa untuk kondisi
penawaran dengan batasannya sebagai fungsi
dari harga komoditi, teknologi, dan faktor
koreksi lainnya.
2. Tabel di bawah ini menunjukkan karakter
penawaran dari 3 produsen komoditas yang sama
Harga Jumlah yang ditawarkan

(pada periode tertentu)
Produsen 1 Produsen 2 Produsen 3
600 22 42 53
500 20 40 50
400 16 36 46
300 10 30 42
200 0 20 35
100 0 0 25
0 0 0 0
a. Plot ketiganya dalam satu grafik
b. Gambarkan kurva penawaran untuk komoditi
ini. Jelaskan.
3. Suatu negara kecil hanya mempunyai dua
macam hasil andalan: sepatu dan beras.
Sumberdaya ekonomi seperti tanah, tenaga
kerja, dan permodalan sangat terbatas sehingga
faktor-faktor yang diserap oleh salah satu hasil
akan mengurangi yang lainnya. Adapun
hubungan antara kedua hasil andalan ini adalah
sebagai berikut:
Produk Kemungkinan produksi
A B C D E
Sepatu (ribuan pasang) 0 10 20 30 40

Beras (ribuan ton) 100 90 70 40 0
Gambarkan grafik hubungan antara kedua produk andalan ini,
dan berikan ulasan.

4. A, B, dan C adalah tiga pengusaha dengan pola kebutuhan/
permintaan belanja bahan baku sebagai berikut:
A Harga 201 200 150 100 75 50 40
Jumlah 0 1 2 3 4 5 6
B Harga 351 350 300 250 200 175 150 125 75 40
Jumlah 0 1 2 3 4 5 6 7 8 8
C Harga 151 150 100 75 50 40
Jumlah 0 1 1 2 3 4
a. Gambarkan grafik kebutuhan/permintaan
untuk masing-masing pengusaha
b.Gambarkan grafik gabungan kebutuhan ketiga
pengusaha
c. Berikan ulasan tentang a dan b.
The End

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MARKET MECHANISM

SUPPLY AND DEMAND

• A firm is an organization that transforms

• The circular flow of

• Input markets are the

Input markets include:

Supply-demand analysis is a fundamental and powerful

and important problems. To name a few:

The Demand Curve

The Demand Curve

The demand curve, labeled D,

A household’s decision about the quantity of a particular

• Quantity demanded is the amount

• The law of demand

• Income is the sum of all households

• Wealth, or net worth, is the total value

• Normal Goods are goods for which

• Substitutes are goods that can serve as

• Complements are goods that “go

• When demand shifts to

Change in quantity demanded

Change in income, preferences, or

• Higher income • Higher income

• Demand for substitute good (chicken)

• Price of hamburger rises

• Demand for a good or service can be

• Market demand is the sum of all the

• Assuming there are only two households in the

The Supply Curve

The Supply Curve

The supply curve, labeled S in

If production costs fall, firms

CLARENCE BROWN'S • A supply schedule is a table

• A supply curve is a graph illustrating how much

Price of soybeans per bushel ($)

• The law of supply

• The price of the good or service.

• In this example, a higher

• When supply shifts

Change in quantity supplied

Change in costs, input prices, technology, or prices of

• The supply of a good or service can be defined

• Market supply is the sum of all the quantities of

• As with market demand, market supply is the

• The operation of the market

• An equilibrium is the condition

• At equilibrium, there is no tendency

Supply and Demand

The market clears at price P0

At the higher price P1, a surplus

At the lower price P2, there is a

When the supply curve

When the demand curve

• Higher demand leads to • Higher supply leads to

• Lower demand leads to • Lower supply leads to

• The relative magnitudes of change in supply and

• When supply and demand both increase, quantity

Harga Jumlah yang ditawarkan

b. Gambarkan kurva penawaran untuk komoditi

Sepatu (ribuan pasang) 0 10 20 30 40

Gambarkan grafik hubungan antara kedua produk andalan ini,

dan berikan ulasan.

permintaan belanja bahan baku sebagai berikut:

A Harga 201 200 150 100 75 50 40