Materi Dosen Pengantar Ekonomi: Dr Saparuddin Mukhtar, M.Si

1. Sumber : Mankiw / G Mankiw / Krugman
The Market Forces of Supply
and Demand
Saparuddin M
www.edunomic.net
saparuddin@feunj.ac.id
081318811577

2. Saparuddin M www.edunomic.net itunk77@gmail.com 0813 1881 1577
How to Market Work

3. WHAT YOU WILL LEARN IN THIS CHAPTER
 What a competitive market is and how it is
described by the supply and demand model
 What the demand curve and supply curve are
 movements along a curve and shifts of a curve
 How the supply and demand curves determine a
market’s equilibrium price and equilibrium
quantity

4. Supply and Demand
 A competitive market:
 Many buyers and sellers
 Same good or service
 The supply and demand model is a model of how
a competitive market works.
 Five key elements:
 Demand curve
 Supply curve
 Demand and supply curve shifts
 Market equilibrium
 Changes in the market equilibrium

5. Demand Schedule
 A demand schedule shows how much of a good or
service consumers will want to buy at different
prices.

6. 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.

7. Demand Curve
A demand curve is the
graphical representation
of the demand schedule;
it shows how much of a
good or service
consumers want to buy at
any given price.
70 9 11 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50
Price of
coffee bean
(per gallon)
Quantity of coffee beans
(billions of pounds)
Demand
curve, D
As price rises,
the quantity
demanded falls
7.1
7.5
8.1
8.9
10.0
11.5
14.2
Price of
coffee
beans
(per pound)
Quantity of coffee
beans demanded
(billions of
pounds)
1.75
1.50
1.25
1.00
0.75
0.50
$2.00
Demand Schedule for Coffee Beans

8. Demand Curve
A demand curve is the
graphical representation
of the demand schedule;
it shows how much of a
good or service
consumers want to buy at
any given price.
70 9 11 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50
Price of
coffee bean
(per gallon)
Quantity of coffee beans
(billions of pounds)
Demand
curve, D
As price rises,
the quantity
demanded falls
7.1
7.5
8.1
8.9
10.0
11.5
14.2
Price of
coffee
beans
(per pound)
Quantity of coffee
beans demanded
(billions of
pounds)
1.75
1.50
1.25
1.00
0.75
0.50
$2.00
Demand Schedule for Coffee Beans
What if
Demand
Increases?

9. An Increase in Demand
A shift of the demand curve is a change in the quantity demanded at any
given price, represented by the change of the original demand curve to a new
position, denoted by a new demand curve.
Increase inIncrease in
populationpopulation
more coffeemore coffee
drinkersdrinkers
Price of
coffee beans
(per gallon)
70 9 11 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50 D
1
D
2
Demand curve
in 2006
Demand curve
in 2002
Quantity of coffee beans
(billions of pounds)
7.1
7.5
8.1
8.9
10.0
11.5
14.2
8.5
9.0
9.7
10.7
12.0
13.8
17.0
in 2002 in 2006
$2.00
1.75
1.50
1.25
1.00
0.75
0.50
Price of
coffee beans
(per pound)
Quantity of coffee
beans demanded
(billions of
pounds)
Demand Schedules for Coffee Beans

10. Demand Curve
A demand curve is the
graphical representation
of the demand schedule;
it shows how much of a
good or service
consumers want to buy at
any given price.
70 9 11 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50
Price of
coffee bean
(per gallon)
Quantity of coffee beans
(billions of pounds)
Demand
curve, D
As price rises,
the quantity
demanded falls
7.1
7.5
8.1
8.9
10.0
11.5
14.2
Price of
coffee
beans
(per pound)
Quantity of coffee
beans demanded
(billions of
pounds)
1.75
1.50
1.25
1.00
0.75
0.50
$2.00
Demand Schedule for Coffee Beans
What if
Demand
Decreases?

11. Movement Along the Demand Curve
7 8.1 9.70 10 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50 D
1
D
2
A C
B
A shift of the
demand curve…
… is not the same
thing as a movement
along the demand
curve
Price of
coffee
beans (per
gallon)
Quantity of coffee
beans (billions of
pounds)
A movement along the demand
curve is a change in the
quantity demanded of a good
that is the result of a change in
that good’s price.

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14. Market Demand Curve
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

15. What Causes a Demand Curve to Shift?
 Changes in the Prices of Related Goods
 Substitutes: Two goods are substitutes if a fall in the
price of one of the goods makes consumers less willing
to buy the other good.
 Complements: Two goods are complements if a fall in
the price of one good makes people more willing to buy
the other good.

16. What Causes a Demand Curve to Shift?
 Changes in Income
 Normal Goods: When a rise in income increases the
demand for a good - the normal case - we say that the
good is a normal good.
 Inferior Goods: When a rise in income decreases the
demand for a good, it is an inferior good.
 Changes in Tastes
 Changes in Expectations

17. Individual Demand Curve and the Market Demand Curve
The market demand curve is the horizontal sum of the
individual demand curves of all consumers in that market.
DDarla DDino
0 0 10 203020 0
$2
1
$2
1
$2
1
30 40 50
DMarket
(a)
Darla’s Individual
Demand Curve
(b)
Dino’s Individual
Demand Curve
(c)
Market Demand Curve
Price of
coffee
beans (per
pound)
Price of
coffee
beans (per
pound)
Price of
coffee
beans (per
pound)
Quantity of coffee
beans (pounds)
Quantity of coffee
beans (pounds)
Quantity of coffee
beans (pounds)

18. LAW OF SUPPLY
 As Price Rises…
…Quantity Supplied Rises
 As Price Falls…
…Quantity Supplied Falls

19. DETERMINANTS OF SUPPLY
 Resource Prices
 Technology
 Taxes & Subsidies
 Prices of Other Goods
 Price Expectations
 Number of Sellers

20. 5
P
Qo
$5
4
3
2
1
10 20 30 40 50 60 70 80
$5
4
3
2
1
60
50
35
20
5
P QS
Price of Corn
Quantity of Corn
CORN
Plot the
Points
GRAPHING SUPPLY

21. P
Qo
$5
4
3
2
1
10 20 30 40 50 60 70 80
$5
4
3
2
1
60
50
35
20
5
P QS
Price of Corn
Quantity of Corn
CORN
Plot the
Points
GRAPHING SUPPLY

22. 35
P
Qo
$5
4
3
2
1
10 20 30 40 50 60 70 80
$5
4
3
2
1
60
50
35
20
5
P QS
Price of Corn
Quantity of Corn
CORN
Plot the
Points
GRAPHING SUPPLY

23. P
Qo
$5
4
3
2
1
10 20 30 40 50 60 70 80
$5
4
3
2
1
60
50
35
20
5
P QS
Price of Corn
Quantity of Corn
CORN
Plot the
Points
GRAPHING SUPPLY

24. P
Qo
$5
4
3
2
1
10 20 30 40 50 60 70 80
$5
4
3
2
1
60
50
35
20
5
P QS
Price of Corn
Quantity of Corn
CORN
Plot the
Points
GRAPHING SUPPLY

25. S
P
Qo
$5
4
3
2
1
10 20 30 40 50 60 70 80
$5
4
3
2
1
60
50
35
20
5
P QS
Price of Corn
Quantity of Corn
CORN
Plot the
Points
Connect the
Points
GRAPHING SUPPLY

26. S
P
Qo
$5
4
3
2
1
10 20 30 40 50 60 70 80
$5
4
3
2
1
60
50
35
20
5
P QS
Price of Corn
Quantity of Corn
CORN
What if
Supply
Increases?
GRAPHING SUPPLY

27. S
P
Qo
$5
4
3
2
1
10 20 30 40 50 60 70 80
Price of Corn
Quantity of Corn
$5
4
3
2
1
60
50
35
20
5
P QS
CORN
80
70
60
45
30
S’Increase
in
Supply
Increase
in Quantity
Supplied
GRAPHING SUPPLY

28. S
P
Qo
$5
4
3
2
1
10 20 30 40 50 60 70 80
$5
4
3
2
1
60
50
35
20
5
P QS
Price of Corn
Quantity of Corn
CORN
What if
Supply
Decreases?
GRAPHING SUPPLY

29. S
P
Qo
$5
4
3
2
1
10 20 30 40 50 60 70 80
$5
4
3
2
1
60
50
35
20
5
P QS
Price of Corn
Quantity of Corn
CORN
S’
45
30
20
0
--
Decrease
in
Supply
Decrease
in Quantity
Supplied
GRAPHING SUPPLY

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32. S
P
Qo
$5
4
3
2
1
10 20 30 40 50 60 70 80
$5
4
3
2
1
60
50
35
20
5
P QS
Price of Corn
Quantity of Corn
CORN
Combining
with
Demand
GRAPHING SUPPLY

33. MARKET DEMAND & SUPPLY
$5
4
3
2
1
10
20
35
55
80
$5
4
3
2
1
60
50
35
20
5
x
200
B
U
Y
E
R
S
P QD
BUSHELS
OF CORN
MARKE
T
DEMAN
D2,000
4,000
7,000
11,000
16,000
x
200
S
E
L
L
E
R
S
12,000
10,000
7,000
4,000
1,000
P QS
BUSHELS
OF CORN
MARKE
T
SUPPLY
EQUILIBRIUM
Graphically…

34. 7
S
P
Qo
$5
4
3
2
1
2 4 6 8 10 12 14 16
P QD
$5
4
3
2
1
2,000
4,000
7,000
11,000
16,000
$5
4
3
2
1
12,000
10,000
7,000
4,000
1,000D
P QS
Price of Corn
Quantity of Corn
CORN
MARKET
CORN
MARKET
Market
Clearing
Equilibrium
MARKET DEMAND & SUPPLY

35. 7
S
P
Qo
$5
4
3
2
1
2 4 6 8 10 12 14 16
P QD
$5
4
3
2
1
2,000
4,000
7,000
11,000
16,000
$5
4
3
2
1
12,000
10,000
7,000
4,000
1,000D
P QS
Price of Corn
Quantity of Corn
CORN
MARKET
CORN
MARKETSurplus
At a $4 price
more is being
supplied than
demanded
MARKET DEMAND & SUPPLY

36. 117
S
P
Qo
$5
4
3
2
1
2 4 6 8 10 12 14 16
P QD
$5
4
3
2
1
2,000
4,000
7,000
11,000
16,000
$5
4
3
2
1
12,000
10,000
7,000
4,000
1,000D
P QS
Price of Corn
Quantity of Corn
CORN
MARKET
CORN
MARKET
At a $2 price
more is being
demanded than
supplied
Shortage
MARKET DEMAND & SUPPLY

37. Market Disequilibria
 Excess demand, or
shortage, is the condition
that exists when quantity
demanded exceeds
quantity supplied at the
current price.
• When quantity demandedWhen quantity demanded
exceeds quantity supplied,exceeds quantity supplied,
price tends to rise untilprice tends to rise until
equilibrium is restored.equilibrium is restored.

38. Market Disequilibria
 Excess supply, or
surplus, is the condition
that exists when quantity
supplied exceeds quantity
demanded at the current
price.
• When quantity suppliedWhen quantity supplied
exceeds quantity demanded,exceeds quantity demanded,
price tends to fall untilprice tends to fall until
equilibrium is restored.equilibrium is restored.

39. Increases in Demand and Supply
 Higher demand leads to
higher equilibrium price and
higher equilibrium quantity.
 Higher supply leads to
lower equilibrium price and
higher equilibrium quantity.

40. Decreases in Demand and Supply
 Lower demand leads to
lower price and lower
quantity exchanged.
 Lower supply leads to
higher price and lower
quantity exchanged.

41. Relative Magnitudes of Change
• The relative magnitudes of change in supply and demandThe relative magnitudes of change in supply and demand
determine the outcome of market equilibrium.determine the outcome of market equilibrium.

42. Relative Magnitudes of Change
• When supply and demand both increase, quantity willWhen supply and demand both increase, quantity will
increase, but price may go up or down.increase, but price may go up or down.

43. (contoh kasus)
Permintaan suatu barang ditunjukkan dengan
persamaan
Q = 60 – 10P;
dan penawaran barang ditunjukkan dengan
persamaan
Q = 5P + 15. dimana Q adalah jumlah barang
dan P adalah harga. Buatlah :
(a)skedul keseimbangan (ekuilibrium) dan
(b)gambarkan kurva keseimbangan permintaan
dan penawaran barang tersebut

44. Jawab:
(a) Skedul;
Harga (P) 2 3 4
Jml Diminta 40 30 20
Jml Ditawarkan 25 30 35
P
Q0
D
; Q
= 60 -10P
3
30
S
; Q
=
5P
+
15
(b) Keseimbangan secara matematis;
Qs = Qd
5P + 15 = 60 – 10P 15P = 45
Maka P = 3 dan Q = 30

45. Mekanisme Pasar
Di ketahui :
Qd = 40 – 5P;
Qs = 7P + 10.
Buatlah (a) hitunglah keseimbangan Q dan P lalu gambarkan kurva
permintaan dan penawaran, (b) gambarkan kurva keseimbangan
permintaan dan penawaran barang tersebut

46. DEMAND ANALYSIS
- Demand (Permintaan) adalah kuantitas barang atau jasa yg. rela atau mampu dibeli
oleh konsumen selama periode waktu tertentu berdasarkan kondisi-kondisi tertentu.
- Model matematis konsep permintaan barang atau jasa :
QDX = F (PX, I, PR, PE, IE, PAE, T, N, A, F, O)
Dimana :
QDX = kuantitas permintaan barang atau jasa
F = fungsi, berarti fungsi dari atau tergantung pada
PX = harga dari barang atau jasa X
I = pendapatan konsumen
PR = harga dari barang lain yang bersangkutan
PE = ekspektasi konsumen terhadap harga dari barang/jasa X di masa mendatang
IE = ekspektasi konsumen terhadap tingkat pendapatan di masa mendatang
PAE = ekspektasi konsumen thdp. ketersediaan barang / jasa X di masa mendatang
T = selera konsumen
N = banyaknya konsumen potensial
A = pengeluaran iklan
F = features atau atribut dari barang / jasa tersebut
O = faktor-faktor spesifik lain dari permintaan barang / jasa tersebut

47. CONTOH SOAL DEMAND ANALYSIS
Permintaan TV berwarna (20 inchi) ditemukan fungsi permintaan secara umum
sebagai berikut : QDX = -1,4 – 15 PX + 7,5 PR + 2,6 I + 2,5 A
QDX = kuantitas permintaan TV berwarna (ribuan unit)
PX = harga dari TV berwarna (ratusan ribu rupiah)
PR = harga TV dari merk lain (ratusan ribu rupiah)
I = pendapatan konsumen (jutaan rupiah per tahun)
A = pengeluaran iklan produk TV tersebut (ratusan juta rupiah per tahun)
Contoh :
Tahun 2013, harga rata-rata TV berwarna 20 inchi Samsung di DKI Rp.
1,1 juta; harga TV berwarna merk lain Rp. 0,9 juta; rata-rata pendapatan
konsumen Rp. 10 juta per tahun dan total pengeluaran iklan untuk TV
berwarna Samsung 20 inchi Rp. 5 milyar.
- Tentukan fungsi permintaan TV berwarna Samsung 20 inchi !
- Hitunglah besar kuantitas permintaan TV berwarna Samsung 20 inchi !
- Gambarkan fungsi Demand tersebut !

48. SUPPLY ANALYSIS
- Supply (penawaran) adalah kuantitas produk yang ditawarkan atau dijual di
pasar yang secara umum sangat tergantung pada sejumlah variabel.
- Model matematis konsep penawaran produk :
QSX = F (PX, PI, PR, T, PE, NF, O)
Dimana :
QSX = kuantitas penawaran produk X
F = fungsi, berarti fungsi dari atau tergantung pada
PX = harga dari produk X
PI = harga input yang digunakan untuk memproduksi produk X
PR = harga dari produk lain (pengganti)
T = tingkat teknologi yang tersedia
PE = ekspektasi produsen terhadap harga produk X di masa mendatang
NF = banyaknya perusahaan yang memproduksi produk yang sama
O = faktor-faktor spesifik lain dari penawaran produk tersebut

49. JAWABAN SOAL DEMAND ANALYSIS
1. Fungsi Permintaan
QDX = - 1,4 – 15 PX + 7,5 PR + 2,6 I + 2,5 A
= - 1,4 – 15 PX + 7,5 (9) + 2,6 (10) + 2,5 (50)
= 217,1 – 15 PX
2. Kuantitas Permintaan
QDX = 217,1 – 15 (11)
= 217,1 – 165
= 51,9
3. - Titik potong sumbu QDX, syarat PX = 0
QDX = 217,1 – 0 = 217,1  (217,1 ; 0)
- Titik potong sumbu PX, syarat QDX = 0
0 = 217,1 – 15 PX
15 PX = 217,1
PX = 14,47  (0 ; 14,47)

50. KURVA PERMINTAAN
PX
(0 , 14,47) QDX = 217,1 – 15 PX
0 (217,1 ; 0) QX

51. JAWABAN SOAL SUPPLY ANALYSIS
1. Fungsi Penawaran
QSX = 325 + 7 PX - 0,25 PI - 8 PR + 5 NF
= 325 + 7 PX - 0,25 (500) - 8 (25)+ 5 (20)
= 100 + 7 PX
2. Kuantitas Penawaran
QSX = 100 + 7 (75)
= 100 + 525
= 625  625.000 m2
3. - Titik potong sumbu QSX, syarat PX = 0
QSX = 100 + 0 = 100  (100 , 0)
- Titik potong sumbu PX, syarat QSX = 0
0 = 100 + 7 PX
7 PX = - 100
PX = - 14,28  (0 ; -14,28)

52. KURVA PENAWARAN
PX
QSX = 100 + 7 PX
0 QX
(100 , 0)
(0 ; -14,28)

53. CONTOH SOAL SUPPLY ANALYSIS
Fungsi penawaran ruang pusat perbelanjaan (mall) di Surabaya tahun 1996
adalah sebagai berikut : QSX = 325 + 7 PX – 0,25 PI – 8 PR + 5 NF
QSX = kuantitas penawaran sewa ruang mall (000 m²)
PX = harga sewa mall (US $ / m² / bln.)
PI = harga input pembangunan mall (US $ / m²)
PR = harga sewa ruang perkantoran (US $ / m²)
NF = banyaknya pengembang yang menawarkan sewa ruang mall
(unit perusahaan)
Contoh :
Apabila rata-rata harga sewa mall US $ 75 / m² / bln. Dan rata-rata biaya
pembangunan (harga input) ruangan mall US $ 500 / m², rata-rata harga
sewa ruang perkantoran US $ 25 / m² / bln., jumlah pengembang yang
menawarkan sewa ruang mall 20 perusahaan.
- Tentukan fungsi penawaran !
- Hitunglah besar kuantitas penawaran sewa ruang mall (000 m²) !
- Gambarkan fungsi Supply tersebut !

54. Simultaneous Shifts of Supply and Demand
Two opposing forces
determining the
equilibrium quantity.
The increase in
demand dominates the
decrease in supply.
Quantity of coffeeQ2
Q
1
P
2
P
1
S
2
D
2
D
1
S
1
E
1
E
2
(a) One possible outcome: Price Rises, Quantity Rises
Price of coffee
Small decrease
in supply
Large increase
in demand

55. Simultaneous Shifts of Supply and Demand
Two opposing forces
determining the
equilibrium quantity.
Q
1
Q
2
P
2
P
1
S
2
D
2
D
1
S
1
E
1
E
2
(b) Another Possibility Outcome: Price Rises, Quantity Falls
Price of coffee
Quantity of coffee
Large
decrease
in supply
Small increase
in demand

56. Simultaneous Shifts of Supply and Demand
We can make the following predictions about the outcome when
the supply and demand curves shift simultaneously:
Simultaneous
Shifts of
Supply and
Demand
Supply Increases Supply Decreases
Demand
Increases
Price: ambiguous
Quantity: up
Price: up
Quantity: ambiguous
Demand
Decreases
Price: down
Quantity: ambiguous
Price: ambiguous
Quantity: down

57.  A recent drought in Australia reduced the amount of grass
on which Australian dairy cows could feed, thus limiting the
amount of milk these cows produced for export.
 At the same time, a new tax levied by the government of
Argentina raised the price of the milk the country exported,
thereby decreasing Argentine milk sales worldwide.
 These two developments produced a supply shortage in the
world market, which dairy farmers in Europe couldn’t fill
because of strict production quotas set by the European
Union.
Demand and Supply Shifts at Work in the Global
Economy

58.  In China, meanwhile, demand for milk and milk
products increased, as rising income levels drove
higher per-capita consumption.
 All these occurrences resulted in a strong upward
pressure on the price of milk everywhere in 2007.
Demand and Supply Shifts at Work in the Global
Economy

59. SUMMARY
1. The supply and demand model illustrates how a
competitive market works.
2. The demand schedule shows the quantity demanded at
each price and is represented graphically by a demand
curve. The law of demand says that demand curves slope
downward.
3. A movement along the demand curve occurs when a
price change leads to a change in the quantity demanded.
When economists talk of increasing or decreasing demand,
they mean shifts of the demand curve—a change in the
quantity demanded at any given price.

60. SUMMARY
4. There are five main factors that shift the demand curve:
• A change in the prices of related goods or services
• A change in income
• A change in tastes
• A change in expectations
• A change in the number of consumers
4. The market demand curve for a good or service is the
horizontal sum of the individual demand curves of all
consumers in the market.
5. The supply schedule shows the quantity supplied at
each price and is represented graphically by a supply
curve. Supply curves usually slope upward.

61. SUMMARY
7. A movement along the supply curve occurs when a price
change leads to a change in the quantity supplied. When
economists talk of increasing or decreasing supply, they
mean shifts of the supply curve—a change in the
quantity supplied at any given price.
8. There are five main factors that shift the supply curve:
• A change in input prices
• A change in the prices of related goods and services
• A change in technology
• A change in expectations
• A change in the number of producers
9. The market supply curve for a good or service is the
horizontal sum of the individual supply curves of all
producers in the market.

62. SUMMARY
10. The supply and demand model is based on the principle
that the price in a market moves to its equilibrium price,
or market-clearing price, the price at which the quantity
demanded is equal to the quantity supplied. This quantity
is the equilibrium quantity. When the price is above its
market-clearing level, there is a surplus that pushes the
price down. When the price is below its market-clearing
level, there is a shortage that pushes the price up.
11. An increase in demand increases both the equilibrium
price and the equilibrium quantity; a decrease in demand
has the opposite effect. An increase in supply reduces the
equilibrium price and increases the equilibrium quantity; a
decrease in supply has the opposite effect.
12. Shifts of the demand curve and the supply curve can
happen simultaneously.

63. SUMMARY Supply Schedule
• A supply schedule
shows how much of a
good or service
would be supplied at
different prices.
Supply Schedule for Coffee Beans
Price of
coffee beans
(per pound)
Quantity of
coffee beans
supplied
(billions of
pounds)
$2.00 11.6
1.75 11.5
1.50 11.2
1.25 10.7
1.00 10.0
0.75 9.1
0.50 8.0

64. SUMMARY Supply Curve
Quantity of coffee beans (billions of pounds)
Price of coffee
beans (per pound)
70 9 11 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50
As price rises, the
quantity supplied
rises.
A supply
curve shows
graphically
how much of
a good or
service
people are
willing to sell
at any given
price.
Supply
curve, S
Supply Schedule for
Coffee Beans
Price of
coffee beans
(per pound)
Quantity of
coffee beans
supplied
(billions of
pounds)
$2.00 11.6
1.75 11.5
1.50 11.2
1.25 10.7
1.00 10.0
0.75 9.1
0.50 8.0

65. SUMMARY An Increase in Supply
Supply Schedule for Coffee Beans
Price of
coffee beans
(per pound)
Quantity of beans supplied
(billions of pounds)
In 2002 In 2006
$2.00 11.6 13.9
1.75 11.5 13.8
1.50 11.2 13.4
1.25 10.7 12.8
1.00 10.0 12.0
0.75 9.1 10.9
0.50 8.0 9.6

66. SUMMARY An Increase in Supply
A shift of the supply curve is a change in the quantity supplied of a good at any given
price.
70 9 11 13 15 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50
S
1
S
2
Price of coffee
beans (per
pound)
Quantity of coffee beans
(billions of pounds)
… is not the
same thing as a
shift of the
supply curve
A movement
along the
supply curve…
Supply Schedule for Coffee
Beans
Price of
coffee
beans
(per
pound)
Quantity of beans
supplied
(billions of pounds)
In 2002 In 2006
$2.00 11.6 13.9
1.75 11.5 13.8
1.50 11.2 13.4
1.25 10.7 12.8
1.00 10.0 12.0
0.75 9.1 10.9
0.50 8.0 9.6

67. SUMMARY
Movement Along the Supply Curve
A movement along the supply curve is a change in the quantity supplied of a
good that is the result of a change in that good’s price.
70 10 11.2 12 15 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50
S
1
S
2
A
C
B
Price of coffee
beans (per
pound)
Quantity of coffee beans
(billions of pounds)
… is not the
same thing as
a shift of the
supply curve
A movement
along the supply
curve…

68. SUMMARY
Any “increase in
supply” means a
rightward shift of the
supply curve: at any
given price, there is an
increase in the quantity
supplied. (S1 S2)
Shifts of the Supply Curve
S
3
S
1
S
2
Price
Quantity
Decrease in
supply
Increase in
supply
Any “decrease in
supply” means a
leftward shift of the
supply curve: at any
given price, there is a
decrease in the
quantity supplied.
(S1 S3)

69. SUMMARY
• Changes in input prices
– An input is a good that is used to produce
another good.
• Changes in the prices of related goods and
services
• Changes in technology
• Changes in expectations
• Changes in the number of producers
What Causes a Supply Curve to Shift?

70. SUMMARY
Individual Supply Curve and the Market Supply
CurveThe market supply curve is the horizontal sum of the individual
supply curves of all firms in that market.
SFigueroa SBien Pho
1 2 31 22 31 4 500 0
$2
1
$2
1
$2
1
SMarket
(a)
Mr. Figueroa’s
Individual Supply Curve
(b)
Mr. Bien Pho’s Individual
Supply Curve
(c)
Market Supply Curve
Price of
coffee
beans (per
pound)
Price of
coffee
beans (per
pound)
Price of
coffee
beans (per
pound)
Quantity of coffee
beans (pounds)
Quantity of coffee
beans (pounds)
Quantity of coffee
beans (pounds)

71. SUMMARY
Supply, Demand and Equilibrium
• Equilibrium in a competitive market: when
the quantity demanded of a good equals
the quantity supplied of that good.

72. SUMMARY
Market equilibrium
occurs at point E,
where the supply
curve and the demand
curve intersect.
Price of
coffee beans
(per pound)
Quantity of coffee beans
(billions of pounds)
70 10 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50
Supply
Demand
E EquilibriumEquilibrium
price
Equilibrium
quantity
Market Equilibrium

73. SUMMARY
There is a surplus of a
good when the quantity
supplied exceeds the
quantity demanded.
Surpluses occur when
the price is above its
equilibrium level.
70 10 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50
Supply
Demand
8.1 11.2
E
Surplus
Quantity
demanded
Quantity
supplied
Price of coffee
beans (per pound)
Quantity of coffee beans
(billions of pounds)
Surplus

74. SUMMARY
70 10 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50
Supply
Demand
9.1 11.5
E
Shortage
Quantity
demanded
Quantity
supplied
Price of
coffee beans
(per pound)
Quantity of coffee beans
(billions of pounds)
There is a shortage of a
good when the quantity
demanded exceeds the
quantity supplied.
Shortages occur when
the price is below its
equilibrium level.
Shortage

75. SUMMARY
Equilibrium and Shifts of the Demand
Curve
Q
2
Q
1
P
2
P
1
D
2
Supply
D
1
E
2
E
1
Price of coffee
beans
Quantity of coffee beans
Price
rises
Quantity rises
An increase in
demand…
… leads to a
movement along the
supply curve due to a
higher equilibrium price
and higher equilibrium
quantity

76. SUMMARY
Equilibrium and Shifts of the Supply
Curve
P
2
P
1
Q
1
Q
2
Demand
E1
S
1
S
2
E
2
Price of
coffee beans
Quantity of coffee beans
Price
rises
Quantity falls
A decrease
in supply…
… leads to a movement
along the demand curve
due to a higher
equilibrium price and
lower equilibrium
quantity

77. SUMMARY
Technology Shifts of the Supply
CurvePrice
Quantity
S1
Demand
E1
E2
An increase in
supply …
P2
P1
Q
1
Q
2
… leads to a movement
along the demand curve to
a lower equilibrium price
and higher equilibrium
quantity.
Price
falls
Quantity increases
S2
Technological innovation: In the early
1970s, engineers learned how to put
microscopic electronic components
onto a silicon chip; progress in the
technique has allowed ever more
components to be put on each chip.