The Market Forces of

Supply and Demand

Member of Group
Arisa Aqmarina
Adistia D.K
Dimas Aji S.
Hashfi Hawali
Irham Auliya A.
M. Ferry R.
Jayanti M.

Rahmat Tubagus
Patricia C.
Astrid Pardede
Jalu Arthawidya
Maria Faustina
Nofriani S.
Mutiara Adella

Markets
A market is 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.
And Economics, especially Microeconomics
is about how supply and demand interact in
markets.

Market Types or Structures

Competitive Markets
Products are the same,price takers

Monopoly
Monopolistic Competition
Oligopoly

Demand Curve
Price of
Ice-Cream
Cone

$3.0
0
2.5
0
2.0
0
1.5
0
1.0
0
0.5
0
0 1

2 3 4 5 6 7 8 9 1
0

1
1

1
2

Quantity
of IceCream

Why does the Demand

Curve Slope Downward?

Law of Demand
Inverse relationship between price and
quantity.

Law of Diminishing Marginal Utility.

Utility is the extra satisfaction that one
receives from consuming a product.
Marginal means extra.
Diminishing means decreasing.

Market Demand
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.

Ceteris Paribus
Ceteris paribus is 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.
The demand curve slopes downward
because, ceteris paribus, lower prices
imply a greater quantity demanded!

Determinants of Demand
Market price
Consumer income
Prices of related goods
Tastes
Expectations
What are some examples?

Consumer Income
Price of
Ice-Cream
Cone

$3.0
0
2.5
0
2.0
0
1.5
0
1.0
0
0.5
0

Normal Good
An
increase
in
income...

Increase
in demand

D1
0 1

2 3 4 5 6 7 8 9 1
0

1
1

1
2

D2
Quantity
of IceCream

Consumer Income
Inferior Good

Price of
Ice-Cream
Cone

$3.0
0
2.5
0
2.0
0
1.5
0
1.0
0
0.5
0

An
increase
in
income...

Decrease
in demand

D2
0 1

2 3 4 5 6 7 8 9 1
0

D1
1
1

1
2

Quantity
of IceCream

Prices of Related Goods

Substitutes & Complements
When

a fall in the price of one good

reduces the demand for another good,
the two goods are called substitutes.
When a fall in the price of one good
increases the demand for another
good, the two goods are called
complements.

Price of
Ice-Cream
Cone

Supply Curve

$3.0
0
2.5
0
2.0
0
1.5
0
1.0
0
0.5
0
0

1 2 3 4 5 6 7 8 9 1
0

1
1

1
2

Quantity
of IceCream

Law of Supply
The law of supply states that there is a
direct (positive) relationship between
price and quantity supplied.

Change in Quantity Supplied

Price of
Ice-Cream
Cone

S
C

$3.0
0

1.00

A rise in the price

of ice cream cones
results in a
movement along
the supply curve.

Quantity
of IceCream

Market Supply
Market

supply refers to the sum of

all individual supplies for all sellers
of a particular good or service.
Graphically, individual supply
curves are summed horizontally to
obtain the market supply curve.

Determinants of Supply
Market

price
Input prices
Technology
Expectations
Number of producers
What are some examples?

Price of
Ice-Cream
Cone

Equilibrium of
Supply and Demand
Supply

$3.0
0
2.5
0
2.0
0
1.5
0
1.0
0
0.5
0

Equilibriu
m

Demand
0

1 2 3 4 5 6 7 8 9 10 11 12

Quantity
of IceCream

Price of
Ice-Cream
Cone

Excess Supply
Supply

Surplus

$3.0
0
2.5
0
2.0
0
1.5
0
1.0
0
0.5
0

Demand
0

1 2 3 4 5 6 7 8 9 1
0

11 12

Quantity
of IceCream

Excess Demand
Price of
Ice-Cream
Cone

Supply
$2.00
$1.50

Shortage

5 6

Demand

8 9 10 11 12 13
Quantity of
Ice-Cream Cones

Thank You