PAPER

MICROECONOMICS (EKU 111E)

ELASTICITY ( DEMAND & SUPPLY )

Arranged By:

NURUL FEBRIANTI (18)

NI PUTU ANA KARALINA (21)

ECONOMICS MAJOR ( GEP CLASS A1 )

FACULTY OF ECONOMIC AND BUSINESS

UDAYANA UNIVERSITY

2023
 CHAPTER 1

INTRODUCTION

1.1 BACKGROUND

In the world of economics, Familiar with elasticity, both price elasticity of demand
and price elasticity of supply. Elasticity of demand is an economic concept used to
measure how much influence the amount of goods demanded has on the price of a good.
Elasticity of demand can be calculated by the percentage of the size and size of a demand
and price changes to the goods demanded. According to Mankiw (2003), there are many
factors that can affect consumer demand itself, including the price of the goods
themselves, the price of other goods, the income of the consumers themselves, the
number of consumers, the tastes of the consumers themselves and the estimated price of
the goods themselves in the future.

Elasticity of Demand itself has an important role for producers, producers can find
out how much influence the price of an item is marketed to consumers. With producers
knowing this, producers can estimate the amount of production and the price to be
determined for an item to be sold. For consumers, by using the calculation of the elasticity
of demand, consumers can find out how much influence the availability of goods and
prices are marketed to the needs of the consumers themselves. Thus, consumers can
manage their needs properly.

In social life to fulfill the life of a good or service cannot be separated from the
calculation of supply elasticity. Supply elasticity according to Mankiw is a measure of how
much the quantity supplied of a good responds to changes in the price of that good,
calculated as a percentage change in quantity supplied divided by a percentage change in
price.

The role or purpose of the Elasticity of Supply itself is to determine the level of
sensitivity to changes in the amount of a good or service demanded by consumers or
markets as well as goods and services that will be offered by producers as a result of
changes in the price of goods or services demanded or goods and services offered.

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1.2 PROBLEM FORMULATION

1.2.1 What is Demand Elasticity ?

1.2.2 What is Supply Elasticity ?

1.2.3 How the applications about Demand Elasticity and Supply Elasticity ?

1.3 PURPOSE PAPER

1.3.1 To explain about the definition of Demand Elasticity

1.3.2 To explain about the definition of Supply Elasticity

1.3.3 To explain the applications of Demand Elasticity and Supply Elasticity

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 CHAPTER 2

SUBTOPICS

2.1 DEMAND ELASTICITY

Demand elasticity is a description of the extent to which demand for a product

responds to price changes. Demand is the goods and services that consumers want
and are able to buy at the time and price according to their income. The theory of
demand is that if a commodity is produced by a producer, it will be purchased by
consumers because it is in accordance with the desires and prices that consumers
want. The law of demand applies, where the relationship between the price and
demand for a good is inversely proportional to each other. When the price of an
item rises, the demand will fall, and vice versa when the price of an item falls, the
demand will rise.

There are five types of elasticity that vary from zero to infinity, and each type has its
own characteristics when plotted on a curve.

1. Perfectly inelastic, where in this situation the quantity of goods will not change
even if there is a change in price, the amount of elasticity is 0, and has a vertical
curve shape.
P

ED = 0

0 Q
2. Inelastic, where if there is a change in the price of goods, the change in the
amount of goods is only slight, the amount of elasticity <1, has a demand curve
shape with a steep straight line.

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 P

ED < 1

0 Q

3. Unitary elastic, where in this situation, the change in the quantity of goods is
equal to the percentage change in the price of goods, the 5. Perfectly Elastic, has a
magnitude of infinity (~), where if there is a slight increase in price, the quantity
of goods will drop to point 0 and vice versa. Has a horizontal curve shape.amount
of elasticity form = 1, has a straight line curve shape cutting 45˚.
P

ED = 1

0 Q

4. Elastic, where a small change in price can cause a large change in the quantity of
goods, elasticity magnitude > 1, has a slightly flattened curve shape.
P

ED > 1

0 Q
5. Perfectly Elastic, has a magnitude of infinity (~), where if there is a slight
increase in price, the quantity of goods will drop to point 0 and vice versa. Has a
horizontal curve shape.

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 P

ED = ∞

0 Q

There are factors that affect the demand for a good, such as population, income, price
of goods, price of other goods, tastes and consumer preferences.

1. The price of goods, in accordance with the law of demand, which states that if
the price of goods is high, the purchasing power will be low, and vice versa if
the price of goods is low, the purchasing power will be high.
2. The price of substitute goods, is the price of goods that have similar functions.
This of course greatly affects the level of demand for an item, where consumers
will definitely compare the prices of brand A and brand B goods and then buy
goods which according to them have the appropriate price.
3. The number of family members of consumers, the number of family members
also determines the amount of demand that exists. The more the number of
family members, the more needs are met
4. Consumer income, income owned by consumers is an important factor that
raises the size and size of a demand for any type of goods. If people's income is
low, then their purchasing power is also low, so the demand for an item
decreases.
5. Consumer tastes, consumer tastes are also a factor influencing the high and
low demand for an item, even though the price of the item has not changed

I. Supply Elasticity

Supply Elasticity is an indicator of the sensitivity of the amount of supply of a good to

the price of the good itself. In economics itself there is a law of supply where the quantity
of goods produced is proportional to the price of the goods. If the price of an item is
relatively high and stable, the producer can produce a high quantity of goods. Conversely,
if the price of the goods falls, the production of these goods will also fall.

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The types of supply elasticity

1. Perfectly inelastic, a change in price does not bring any change in the quantity of
the good
P

0 Q

2. Inelastic, inelastic supply, if a slight change in the price or cost of production

brings a smaller change in the amount of commodity offered.
P

0 Q

3. Elastic, a change in the price of a commodity or the cost of production brings

about a more proportional change in the quantity offered.
P

0 Q

4. Unitary elastic, if there is a change in price or cost of production, it will cause a

proportional change in the amount of goods sold

0 Q

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 5. Perfectly elastic, this occurs when there is a slight increase in the price of the
good will result in the supply of all available stock of the good and vice versa
P

l 0 Q

The factors that affect supply. Apart from the price of a product, there are
many other factors that can hinder the production of an item, such as the
following :
1. The price of the goods themselves, this refers to the law of supply where if the
price of the goods rises, then production will also increase, while if the price falls,
production will also fall.
2. Production costs, which are costs incurred when producing goods such as the cost
of buying raw materials, costs for employee salaries, costs for auxiliary materials,
and so on.
3. Technological advances, with the existence of technology that helps the
production process of goods, producers can produce more goods but can directly
help reduce production costs.
4. Taxes, taxes which are government provisions on a product, are very influential
on the high and low costs of production.
5. Greatly affects the high and low prices of goods, if the price of goods becomes very
high then demand will decrease and supply will decrease.
6. Contributions, retrubusi according to Law no. 28 of 2009 are local levies as
payment for services or granting certain permits specifically provided and granted
by the Regional government for the benefit of individuals or entities.
7. Future price forecasts, future price forecasts greatly affect the size of the supply.

II. Application

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The table explains the demand for broiler meat on weekdays with price of Rp.24,000,
the demand is 153, the price of Rp.27,000, the demand is 90, the increase in price
causes a decrease in consumer purchasing power and will result in a decrease in
demand. causes a decrease in consumer purchasing power and will result in a
decrease in the amount of demand.

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The table explains the supply of broiler meat on weekdays with a price of Rp.24,000.
price of Rp.24,000, the demand is 145, the price of Rp.27,000, the demand is 210. Does
not cause a decrease in consumer purchasing power and will not result in a decrease
in the number of supply

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 CHAPTER 3

CONCLUSION

Demand is the goods or services that consumers want when they meet the
standard of wants and prices according to their income. Elasticity of demand is a
description of the response of the amount of goods demanded in the event of a price
increase. Supply is the amount of goods or services that are available and can be
offered by producers to consumers. Elasticity of supply is an indicator of the
sensitivity of the amount of supply of a good to the price itself.

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 CHAPTER 4

REFF

Mankiw, N Gregory (2019). Principle of economics, ninth edition. Boston:

Cengage

JURKAMI: Jurnal Pendidikan Ekonomi

http://jurnal.stkippersada.ac.id/jurnal/index.php/JPE

http://tatiek.lecture.ub.ac.id/files/2010/06/d.-Elastisitas-Penerapannya.pdf

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