13/03/2020

Business Economic

Chp 5 – Using Supply and Demand (The application of supply and demand)

 Next Wednesday – Quiz with Chp 5

 Dan ada Grup Project u/ Chp 6 – pilih satu produk, tanyain di pasar/market/tokonya tanya
selama kurang lebih 10 hari atau dua minggu kerja. Tanya, produknya dia jual brp banyak,
nanti bikin table di excel dan bikin graph supply demand dan bikin elasticity nya. Terus
analisis graph nya. Apa yang bikin supplynya tambah, apa yg bikin demandnya kurang. Cek
substitusi/complement produknya. Dan analisis produk. Dan present. Produknya gaboleh
sama.
 Example
o Hurricane Irene destroyed a significant portion of the apple crop in the northeastern
US
 The supply is decrease, demand is higher because there’s scarcity that affect
the price getting higher
o Gasoline in the US is increasingly expensive
 Demand is decreasing, but supply is excessing. That affect the price getting
lower (in order ppl to buy it)
 But in fact, people would still buy it.
o Indonesia lack of infrastructure to buy energy for their
vehicle
o Growing middle class in Asia has increase demand for oils, at the same time, US
farmers are growing more corn and less soy (less soy oil) ((CROSS CONTINENT but
still for the same goods)
 The result is increased priced for edible oil (because scarcity)
o A REVIEW OF CHANGES IN SUPPLY AND DEMAND

A rough review of No change in Supply Increases Supply decreases

changes in Supply Supply
and Demand by
Collander
No change in P same Q same P down Q (supply) P up Q down
Demand up
Demand increases P up Q up P ambiguous Q up P up Q ambiguous
Demand P down Q P down Q P ambiguous Q
decreases (demand) down ambiguous down

 Government Intervention – yang menentukan supply and demand

o Other factors include
 Price ceilings (batas atas) and
 When a government wants to hold prices down to favour
buyers, it imposes a price ceiling
  Therefore it is a government-imposed limit on how high a
price can be charged
 It creates shortages
 PC below equilibrium price will have an effect on the market
 With PC, existing goods are no longer rationed entirely by
price so other methods of rationing arise
 Example
o After WWII, rent controls ( a form of price ceiling)
were put in place
 The rent controls caused a housing shortage
 There would not be a shortage if
rents had been allowed to increase
to the equilibrium price of $17
 Qs < Qd
 Idealnya $17 tp diturunin sm
pemerintah jd $2.5
 price floors (batas bawah) < NANTI TANYA LAGI
 gov wants to prevent a price from falling below a certain
level creates excess supply that favors supplier (worker)
 Price floors above equilibrium price will have an effect on
the market
 Example
o A minimum wage is a type of price floor, it is the
lowest wage a firm can legally pay an employee
 Minimum wages cause unemployment
 Qs banyaknya permintaan dari
employee’
 Ini sisi worker yg kaitannya sm
perusahaan yg gabisa
 EXCESS SUPPLY = UNEMPLOYMENT
 Qd
 Excise taxes and tariffs
 TARRIF IS AN EXCISE TAX ON IMPORTED GOOD
 EXCISE TAX IS A TAX THAT IS LEVIED ON SPECIFIED GOODS
 Example
o Government imposes a $10000 luxury tax on the
suppliers of boats
 Harga naik supply nya jadi turun
o
 Quantity restriction
 Government regulates markets with licenses, which limit
entry into a market
 The results of limited number of license in a market are
increases in wages and an increases in the price of
obtaining the license
 E.g
o Doctors
 o Financial planners
o Cosmetologists
o Electricians
o Taxi cab driver
 Example
o Successful lobbying by taxi cab drivers in NYC
resulted in quantity restrictions (medallions/si
lisensinya)
 Biar wage nya ttp tinggi makanya dibatesin
banyaknya si taxi. kalo banyak taxi driver,
nanti gaji karyawan makin turun (makanya
adanya quantity restriction yaitu quantity
licensenya tapi jd dimahalin quantity
licensenya biar dikit orgnya). Taxi driver
 Tapi untuk perusahaan, demand taxi tinggi
krn gaji jg makin tinggi. Tetapi krn taxinya
limited, price untuk penggunanya juga
meningkat (jd perusahaan lebi untuk, tp
penggunanya jd gamau)
 Third-Party-Payer Markets
 Misal, BPJS, kita Cuma bayar $5 untuk minta 18 unit, tapi
peruusahaan penyedia bpjs mensubsidi $40 krn harga
aslinya 18 unit adalah $45
 Total pengeluaran 18*45
 Summary
o You can describe almost all events in terms of supply and demand
o Price ceilings, government imposed limits on how high a price can be
charged, create shortages
o Price floors, government-imposed limits on how low a price can be charged,
create surpluses
o Taxes and tarrifs paid by suppliers shift the supply curve

Chp 6 – Describing supply and demand: elasticities

 Price Elasticity: Demand

o Price elasticity of demand is the percentage change in quantity demanded divided
by the percentage change in price
%change∈Quantity Demanded % ∆ Q
o Ed= =
% change∈ price %∆P
o Thistells usexactly how quantity demanded responds ¿ a change∈ price
o Elasticity is independent of units
o Elastis atau tidak itu berdasarkan consumer
o Price elasticity of demand is always expressed as positive number (absolute)
o Demand is elastic when percentage change in quantity is greater than the
percentage change in price
  Elastic demand is when Ed > 1
o When demand is elastic, your demand is sensitive to change in price
o When demand is inelastic, your demand is insensitive to change in price
 Contoh: bensin
o There’s a perfectly inelastic, meaning that Q does not respond at all to changes in
price, Ed=0
 Contoh: Karya seni (Monalisa), Barang Antik, Barang Limited Edition
o There’s perfectly elastic, meaning that Q responds enormously to changes in price,
Ed = infinite.
 Contoh: barang-barang charity, garage sell
 Price elasticity: Supply
o Supply is elastic if the percentage change in quantity is greater than the percentage
change in price
 Elastic supply is when Es>1
 Inelastic supply Is when Es<1
 Substitution and Elasticity
o What makes supply or demand more or less elastic?
 Subtition
o A general rule is:
 The more substitutes a good has, the more elastic its supply or demand
 If a good has substitutes, a rise in the price of that good will cause the
consumer to shift consumption to those substitute goods
o Contoh: biscuit
o Thus: create brand loyalty (in marketing)
o The number of substitutes a good has is affected by several factors, four of the most
important factors
 The time period being considered
 The degree to which a good is a luxury
 Kalau makin luxury,substitute makin dikit.
 The market definition
 The importance of the good in one’s budget
 Mo beli roma/regal? Tergantung budget
 Elasticity of Individual and Market demand
o Price discrimination
 Harga tiket bioskop
 Airlines pricing