Managerial Economics &

Business Strategy
Chapter 2
Market Forces: Demand and
Supply

McGraw-Hill/Irwin
Michael R. Baye, Managerial Economics and
Business Strategy
 2-2

OVERVIEW
I. Market Demand Curve III. Market Equilibrium
 The Demand Function IV. Price Restrictions
 Determinants of Demand V. Comparative Statics

II. Market Supply Curve

 The Supply Function
 Supply Shifters
 2-4

I. Market Demand Curve

 Shows the amount of a good that will be purchased at
alternative prices, holding other factors constant.
 Law of Demand
 The demand curve is downward sloping.

Price

D
Quantity
 2-5

Determinants of Demand
 Income (M)
 Normal good
 Inferior good
 Prices of Related Goods (Py)
 Prices of substitutes
 Prices of complements
 Advertising (A)
 Consumer tastes (T)
 Population (Pop)
 Consumer expectations (Pe, Ie, PAe)
 Feature (F)
 Others (O)
 2-6

The Demand Function

 A general equation representing the demand curve
Qxd = f(Px , PY , M, H,)

 Qxd = quantity demand of good X.

 Px = price of good X.
 PY = price of a related good Y.
 Substitute good.
 Complement good.
 M = income.
 Normal good.
 Inferior good.
 H = any other variable affecting demand.
 2-7

Inverse Demand
Function
 Price as a function of
quantity demanded.
 Example:
 Demand Function
 Qxd = 10 – 2Px
 Inverse Demand Function:
 2Px = 10 – Qxd
 Px = 5 – 0.5Qxd
 2-8
Change in Quantity Demanded
Price
A to B: Increase in quantity demanded

A
10

B
6

D0

4 7 Quantity
 2-9

Change in Demand
Price
D0 to D1: Increase in Demand

6
D1

D0
7 13 Quantity
Demonstration Problem 2-1
d
QX  12.000  3PX  4 PY  1M  2 Ax
Fungsi Permintaan secara sederhana :

d
Q X  6.060  3PX
Fungsi Permintaan invers :

PX  2.020  0,333PX
 2-11

II. Market Supply Curve

 The supply curve shows the amount of a good that will be
produced at alternative prices.
 Law of Supply
 The supply curve is upward sloping.

Price
S0

Quantity
 2-12

Supply Shifters
 Input prices (Pi)
 Technology (T) or
government regulations (R)
 Number of firms
 Entry
 Exit
 Substitutes in production (Pr)
 Taxes (Tx)
 Excise tax = lumpsum tax
 Ad valorem tax = proporsional tax
 Producer expectations (Pe)
 2-13

The Supply Function

 An equation representing the supply curve:

QxS = f(Px , PR ,W, H,)

 QxS = quantity supplied of good X.

 Px = price of good X.
 PR = price of a production substitute.
 W = price of inputs (e.g., wages).
 H = other variable affecting supply.
 2-14

Inverse Supply Function

 Price as a function of
quantity supplied.
 Example:
 Supply Function
 Qxs = 10 + 2Px
 Inverse Supply Function:
 2Px = 10 + Qxs
 Px = 5 + 0.5Qxs
 2-15

Change in Quantity Supplied

Price A to B: Increase in quantity supplied

S0
B
20

A
10

5 10 Quantity
 2-16
Change in Supply
S0 to S1: Increase in supply
Price

S0

S1

5 7 Quantity
Demonstration Problem 2-3

Q X s  2.000  3PX  4 Pr  Pw
Fungsi Permintaan secara sederhana :

Q X s  400  3PX
Fungsi Permintaan invers :

PX  133,33  0,333Q X s
 2-19

III. Market Equilibrium

 The Price (P) that Balances

supply and demand
 QxS = Qxd
 No shortage or surplus
 Steady-state
 2-20

If price is too low…

Price S

7
6

Shortage D
12 - 6 = 6
6 8 12 Quantity
 2-21

If price is too high…

Surplus
Price 14 - 6 = 8
S
9
8
7

6 8 14 Quantity
 2-22
IV. Price Restrictions
 Price Ceilings
 The maximum legal price that can be charged.
 Bertujuan untuk membantu konsumen
 Istilah Ceiling merujuk pada harga itu menjadi harga yang paling tinggi yang
diijinkan di pasar  harga yang ditetapkan di bawah harga ekuilibrium
 Akibat : muncul shortage

 Price Floors
 The minimum legal price that can be charged.
 Bertujuan untuk membantu produsen
 Istilah Floor merujuk pada harga itu menjadi harga yang paling rendah yang
diijinkan di pasar  harga yang ditetapkan di atas harga ekuilibrium
 Akibat : muncul surplus
 2-23

Impact of a Price Ceiling

Price S

PF

P*

P Ceiling

Shortage D

Qs Qd Quantity
Q*
 2-24

Impact of a Price Floor

Price Surplus S
PF

P*

Qd Q* QS Quantity
 2-25
IV. Comparative Static Analysis
(Analisis Statistik Komparatif)

 How do the equilibrium price and quantity change when a determinant of

supply and/or demand change?

 Applications of Demand and Supply Analysis

* Changes in Demand  figure 2-13

* Changes in Supply  figure 2-14
* Simultaneous Shifts in Supply and Demand  figure 2-15
 CONTOH SOAL DEMAND ANALYSIS

Permintaan TV berwarna (20 inchi) ditemukan fungsi permintaan

secara umum
sebagai berikut : QDX = -1,4 – 15 PX + 7,5 PY + 2,6 I + 2,5 A
QDX = kuantitas permintaan TV berwarna (ribuan unit)
PX = harga dari TV berwarna (ratusan ribu rupiah)
PY = harga TV dari merk lain (ratusan ribu rupuah)
I = pendapatan konsumen (jutaan rupiah per tahun)
A = pengeluaran iklan produk TV tersebut (ratusan juta rupiah
per tahun)
 ANALISIS KESEIMBANGAN PASAR
Permintaan & Penawaran Kamar Hotel di Surabaya

Titik Harga sewa Kuantitas Kuantitas Kelebihan

Kombinasi (US $ / hari) penawaran permintaan
(kamar / bln.) (kamar / bln.)

A 130 42.500 102.500 - 60.000

B 150 47.500 87.500 - 40.000

C 170 52.500 72.500 - 20.000

D 190 57.500 57.500 0

E 210 62.500 42.500 + 20.000

F 230 67.500 27.500 + 40.000

G 250 72.500 12.500 + 60.000

 SOAL :
1. Anda adalah seorang manajer dari salah satu supplier komputer. Tentunya Anda paham benar
tentang perkembangan industri komputer, dan menemukan bahwa pemerintah Indonesia
mengeluarkan peraturan untuk meningkatkan kembali posisi industri komputer Indonesia pada
perekonomian global. Peraturan itu menyebabkan meningkatnya pendanaan pendidikan komputer
di sekolah dasar dan lanjutan, juga pembebasan pajak untuk perusahaan yang mengembangkan
perangkat lunak (software) komputer. Akibat peraturan ini, apa yang Anda prediksikan akan
terjadi pada HARGA dan KUANTITAS EKUILIBRIUM perangkat lunak (software) ?
Tabel berikut menunjukkan skedul permintaan dan penawaran hipotesis
untuk apartemen di Jakarta dan sekitarnya :