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Demand and Supply

The law of demand says that at higher prices, buyers will demand less of an economic good. The law of supply says that at higher prices, sellers will supply more of an economic good. These two laws interact to determine the actual market prices and volume of goods that are traded on a market.

Demand

Demand is the demand for goods or services of a consumer at a particular point in time. with purchasing power or having the ability to meet those needs

Price ($/Unit) 100 90 80 70 60 50 40
Demand/Demand 30 50 70 98 115 150 180

From the table above, it can be seen that When the price of a product increases, demand or demand decreases ( P>, D<) but vice versa When the price of a product is lower, demand or demand increases ( P<, D>).

Factors Determining Demand

The price of the product, when the price increases, the demand will decrease (P>,D<)

consumer income In the case of normal goods, when consumers earn more, they consume more. However, if income increases and consumers buy that product, then decreases, then that product is Inferior Goods such as instant noodles which in fact may not mean really the quality of the product that instant noodles are not good But it is a matter of perceptions of each consumer who may have different views, for example, if the richer does not want to eat instant noodles. may turn to eat other things, such as fried chicken instead, etc.

Prices of other products Related are divided into 2 types.

Substitute Good, for example, when pig price increases, pork consumer decreases (P>, D<), products used together (Complementary Good), for example, when the price of oil increases, the demand for cars will decrease (P>, D<).

– Consumer tastes, for example, if the taste in consumption changes will cause the demand for products that have been used will change

– Forecasting future income, for example, if consumers know that there will be a salary increase may be consumed in advance causing higher demand for goods

– Other factors such as season, population, etc.

The Law of Demand refers to the systematic relationship between the price of a product and the quantity of demand. buy that product which this rule states: “Prices and demand for goods are correlated in opposite directions.”

Supply

Supply – The quantity of demand for the sale of goods at a certain price level. at any one time by keeping other things fixed

Price ($/Unit) 100 90 80 70 60 50 40
demand/demand 270 240 200 170 140 110 70

From the table above, it can be seen that When the price of a product increases, demand or demand increases (P>, S>). but vice versa When the price of a product decreases, demand or demand increases and decreases (P<, S<).

Factors Determining Supply

– The price of the product, when the price increases, the demand for sale increases (P>, S>)

– The price of the production factor or the cost of production, for example, if the cost of transportation is more expensive because the price of oil is more expensive, but the product price to be sold unchanged This will make manufacturers want to sell products in smaller quantities, earning less profit.

– the price of other products For example, when the price of other products is more expensive, it may result in a decrease in the supply of the product being produced. An obvious example is when the price of corn is higher. People who used to grow cassava. may turn to plant corn instead and reduce cassava planting As a result, the supply of cassava increased while the supply of corn decreased.

– Technology in the production of products, for example, if there is an inventive technology to produce better This makes it possible to produce more products with the same cost. This will increase the number of products offered for sale.

– Forecasts for the future, eg if producers or sellers expect the economy to expand. also sell products in increased quantities, etc.

– Other factors such as seasonality, taxes, and subsidies, number of sellers, and market structure

The law of supply (Law of Supply) refers to the rule that deals with the relationship between the price of a product and the quantity offered for sale. which this rule states: “The quantity of product demand and product prices are related in the same direction.”

Equilibrium is the price level at which buyers and sellers agree. or the price level at which the demand equals the supply, or the demand curve intersects the supply curve.

From the figure, the equilibrium level at Buy demand and sell demand is exactly the same (line D intersects line S at point E).

Where, at a price of $60  per unit, buyers and sellers have a demand of 120 units.

The point where the price is above the equilibrium price will lead to excess supply (Excess supply) and will adjust to the equilibrium price, while the point where the price is below the equilibrium price will occur Excess demand and will adjust to the equilibrium price.