6 Penawaran, Permintaan, dan Kebijakan Pemerintah P R I N C I P L E S O F F O U R T H E D I T I O N The new material introduced in this chapter builds on the material from the preceding two chapters (chapter 4 on supply & demand and chapter 5 on elasticity). Students who learned those chapters well usually do not have much difficulty with the material in chapter 6. This chapter can usually be covered in about 90 minutes of class time. I have combined the analysis of price ceilings with the rent control example, and I’ve combined the analysis of price floors with the minimum wage example. (In contrast, the textbook presents a generic analysis of price ceilings, then the rent control example, then a generic analysis of price floors, then the minimum wage). Most students learn new concepts better in the context of a specific example rather than a generic analysis, and combining them in this way saves class time. Here’s an idea you might consider: At the end of the class session just prior to the one in which you begin to cover this chapter, ask students to take out a piece of blank paper, and write down whether they think the minimum wage should be increased, and their reason(s). Tell them not to write their names (you want them to be candid), and have them leave their pieces of paper in a pile as they exit the classroom. Later, divide the papers into two groups based on whether they support or oppose increasing the minimum wage. In this PowerPoint file, immediately after this slide, insert new two slides, titling them “Your reasons for raising the minimum wage” and “Your reasons for not raising the minimum wage.” Summarize on each slide the most common reasons students gave. Begin the class session by showing them the results of this impromptu survey (how many students responded each way, and the most common reasons). Tell those students that support a minimum wage increase that their thinking represents that of many educated non-economists. But tell them that economics offers another perspective, and this is something they will learn in this chapter. If you do this, then I recommend rearranging the slides a bit so that the price floor/minimum wage slides come BEFORE the price ceiling/rent control slides.

Bab 6 bertujuan untuk mengetahui jawaban pertanyaan-pertanyaan berikut ini: Apa yang dimaksud price ceiling dan price floor? Apa contoh dari masing-masing kasus tersebut? Bagaimana price ceilings dan price floors berdampak pada market outcomes? Bagaimana pajak berdampak pada market outcomes? apakah pajak tersebut dikenakan pada pembeli atau penjual? Apa yang dimaksud dengan incidence of a tax? Apa faktor penentu dari incidence of tax ? When we talk about how a policy “affects the market outcome,” we mean the policy’s impact on the price and quantity, and therefore the allocation of resources. This chapter’s concluding slide elaborates on this a bit. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Kebijakan Pemerintah Mengubah Market Outcome Price controls Price ceiling: kebijakan harga maksimum barang dan jasa. Contoh: rent control. Price floor: kebijakan harga dasar/ kebijakan harga minimum barang dan jasa. contoh: upah minimum. Taxes Kebijakan Pemerintah yang membuat pembeli atau penjual membayar jumlah tertentu pada setiap unit yang dibeli / dijual. This slide presents an outline of the chapter. Kita akan menggunakan model supply/demand untuk melihat bagaimana setiap kebijakan berdampak pada market outcome (harga yang dibayar pembeli, harga yang diterima penjual, dan titik keseimbangan). CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Contoh 1: Pasar untuk Apartemen Q Harga sewa apartemen S D $800 300 Equilibrium tanpa price control We start by analyzing the effects of a price ceiling. The most common example is rent control, so we do the analysis in the context of this example. We begin by showing the market for apartments in equilibrium (before the government imposes any price controls). Kuantitas apartemen CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Bagaimana Price Ceilings Berdampak Pada Market Outcomes price ceiling diatas harga equilibrium (not binding) – hal ini tidak memiliki dampak pada market outcome. P Q S Price ceiling $1000 D $800 300 When some students see this for the first time, they wonder why the price ceiling does not result in a surplus. When the price ceiling is above the equilibrium price, the equilibrium price is still perfectly legal. Just because landlords are allowed to charge $1000 rent doesn’t mean they will – if they do, they won’t be able to rent all of their apartments – a surplus will result, causing downward pressure on the price (rent). There’s no law that prevents the price (rent) from falling, so it does fall until the surplus is gone and equilibrium is reached (at P = $800 and Q = 300). CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Bagaimana Price Ceilings Berdampak Pada Market Outcomes Harga keseimbangan ($800) diatas price ceiling maka harga tersebut tidak sah. Price ceiling binding constraint pada harga, dan menyebabkan shortage. P Q S D $800 Price ceiling $500 250 400 shortage In this case, the price ceiling is binding. In the new equilibrium with the price ceiling, the actual price (rent) of an apartment will be $500. It won’t be more than that, because any higher price is illegal. It won’t be less than $500, because the shortage would be even larger if the price were lower. The actual quantity of apartments rented equals 250, and there is a shortage equal to 150 (the difference between the quantity demanded, 400, and the quantity supplied, 250. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Bagaimana Price Ceilings Berdampak Pada Market Outcomes Q Dalam jangka panjang, supply dan demand lebih elastic. sehingga, shortage menjadi lebih besar. S D $800 Price ceiling $500 shortage In this slide, the equilibrium price ($800) and price ceiling ($500) are the same as on the preceding slides, but supply and demand are more price-elastic than before, and the shortage that results from a binding price ceiling is larger. 150 450 CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Shortages and Rationing Terjadi shortage, penjual harus melakukan rationing barang diantara pembeli. Beberapa mekanisme rationing: (1) long lines (2) discrimination according to sellers’ biases Mekanisme ini sering sekali tidak adil dan tidak efisien (inefficient): the goods don’t necessarily go to the buyers who value them most highly. Sisi yang berlawanan, ketika harga tidak dikontrol, mekanisme rationing efisien (the goods go to the buyers that value them most highly) and impersonal (and thus fair). The last two bullet points discuss “efficiency” in the context of rationing goods to those buyers who value them most highly. This concept will be explored further in the following chapter. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Contoh 2: Pasar untuk Pekerja Tidak Terampil W L Upah yang dibayar untuk pekerja tidak terampil S D $4 500 Titik keseimbangan tanpa price floor Now we switch gears and look at the effects of a price floor. We illustrate this concept using the common textbook example – the minimum wage. This may be the first time students have seen a supply-demand diagram of the labor market. It might be useful to note that the “price” of labor is more commonly known as the wage, which we measure on the vertical axis of our supply-demand diagram. Along the horizontal axis, we measure the quantity of labor (number of workers). The demand for unskilled labor comes from firms. The supply comes from workers. We focus on unskilled labor because the minimum wage is not relevant for higher skilled, higher wage workers. Jumlah pekerja tidak terampil CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Bagaimana Price Floors berdampak pada Market Outcomes price floor dibawah titik keseimbangan (not binding) – tidak memiliki dampak. W L S D $4 500 Price floor $3 Some students see this and wonder why the $3 price floor does not cause a shortage. After all, at a wage of $3, the quantity of unskilled workers that firms wish to hire exceeds the quantity of unskilled workers that are looking for jobs. But the minimum wage law does not stop the wage from rising above $3. So, in response to this shortage, the wage will rise until the shortage evaporates – which occurs at the equilibrium wage of $4. The equilibrium wage is perfectly legal when the price floor (i.e. minimum wage) is below it. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Bagaimana Price Floors berdampak pada Market Outcomes labor surplus keseimbangan upah ($4) dibawah price floor dan harga tersebut tidak sah. floor binding constraint pada upah dan menyebabkan surplus pada pengangguran. W L S Price floor $5 D 400 550 $4 Now, the minimum wage exceeds the equilibrium wage. The equilibrium wage (or any wage below $5) is illegal. In this case, the actual wage will be $5. It will not be lower, because any lower wage is illegal. It will not be higher, because at any higher wage, the surplus would be even greater. The actual number of unskilled workers with jobs equals 400. 550 want jobs, but firms are only willing to hire 400, leaving a surplus (i.e. unemployment) of 150 workers. A surplus of anything – especially labor – represents wasted resources. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Upah Minimum unemp-loyment W L S Min. wage $5 D 400 550 $4 Upah minimum tidak berdampak besar pada pekerja terampil. Hasil studi: kenaikan 10% upah minimum meningkatkan unemployment 1-3%. unemp-loyment W L S Min. wage $5 D 400 550 $4 CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

A C T I V E L E A R N I N G 1: Price floors & ceilings Q P S The market for hotel rooms D Determine effects of: A. $90 price ceiling B. $90 price floor C. $120 price floor 12

A C T I V E L E A R N I N G 1: A. $90 price ceiling Q P S The market for hotel rooms D Harga jatuh, menjadi $90. Permintaan pembeli 120 kamar, penwaran sebesar 90, shortage. Price ceiling shortage = 30 13

A C T I V E L E A R N I N G 1: B. $90 price floor Q P S The market for hotel rooms D Keseimbangan harga diatas floor, (floor is not binding). P = $100, Q = 100 rooms. Price floor 14

A C T I V E L E A R N I N G 1: C. $120 price floor Q P S The market for hotel rooms D Harga meningkat $120. permintaan pembeli 60 kamar, supply 120, terjadi surplus. surplus = 60 Price floor 15

Mengevaluasi Price Controls Recall satu dari Ten Principles: pasar adalah cara terbaik untuk mengatur kegiatan ekonomi. Harga menjadi signals alokasi sumber daya masyarakat. Alokasi ini akan berubah ketika pembuat kebijakan membatasi harga. Price control sering dimaksudkan untuk membantu orang miskin, akan tetapi sering lebih merugikan daripada membantu orang miskin: Rent control dapat mengurangi kuantitas dan kualitas dari perumahan yang terjangkau. Min. upah dapat menyebabkan kehilangan pekerjaan. It might be worth reminding students that our analysis has been in the context of a world without market failures. Subsequent chapters (except in the macro split) will introduce situations in which government intervention in the price system can improve on the private market outcome. However, even in such cases, the appropriate policy is usually something other than a direct price control. The 4th edition adds an excellent new In the News box with an article on rent control from The Economist. Please encourage your students to check it out. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Taxes Pemerintah melakukan pemungutan pajak pada sejumlah barang dan jasa untuk meningkatkan pendapatan yang digunakan untuk membiayai pendidikan, pertahanan negara, dan pembangunan Pemerintah dapat membuat pembeli atau penjual untuk membayar pajak. Untuk membuat sederhana, kita hanya menganalisis pajak per-unit. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Contoh 3: Pasar untuk Pizza Keseimbangan sebelum ada pajak P Q D1 S1 $10.00 500 CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Dampak $1.50 per unit,pajak atas pembeli Pajak Pembeli Pajak atas pembeli menggeser kurva D turun. Dampak $1.50 per unit,pajak atas pembeli P Q D1 S1 $11.00 PB = D2 Tax 430 Harga yang dibayar pembeli meningkat, harga yang diterima penjual turun, keseimbangan Q turun. $10.00 500 $9.50 PS = NOTE: On this and subsequent slides, “PB” is the price buyers pay and “PS” is the price sellers receive. (The chapter 8 PowerPoint uses the same notation for the welfare analysis of taxes.) The government makes buyers pay a $1.50 on each pizza they purchase. The new demand curve (in red, labeled D2) reflects buyers’ demand as a function of the after-tax price. The original demand curve (D1) still reflects buyers’ demand as a function of the total price – inclusive of the tax. Thus, buyers’ demand hasn’t really changed: At each quantity, the height of the original (blue) D curve is still the maximum that buyers will pay for that quantity, while the height of the new (red) D curve is the maximum that buyers will pay sellers for that quantity, given that buyers also must pay the tax. At any Q, the vertical distance between the blue and red D curves equals the tax. Incidentally, if this were a percentage tax rather than a per-unit tax, then the new D curve would not be parallel to the old one, it would be flatter: a tax of a given percentage would be a larger dollar amount at high prices than at low prices, so the downward shift would be greater in absolute terms when P is high than when it is low. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

The Incidence of a Tax: Bagaimana beban pajak dibagi diantara pelaku pasar P Q Karena pajak, pembeli membayar $1.00 lebih tinggi, penjual mendapat $0.50 yang lebih sedikit dari keseimbangan. D1 S1 $11.00 PB = D2 Tax 430 $10.00 500 $9.50 PS = CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Effects of a $1.50 per unit tax on sellers Pajak Atas Penjual Pajak atas penjual membuat pergesaran pada kurva S sejumlah besaran pajak . Effects of a $1.50 per unit tax on sellers P Q S2 D1 S1 $11.00 PB = Tax 430 $10.00 500 $9.50 PS = Harga yang harus dibayar pembeli meningkat, pembeli mendapatkan harga yang turun, keseimbangan Q turun. The government makes sellers pay a $1.50 on each pizza they sell. The new, red supply curve reflects sellers’ supply as a function of the after-tax price. Here’s a way to think about the shift that students might find helpful: Making sellers pay a $1.50 tax on each unit they sell is equivalent to a $1.50 increase in the cost of producing each pizza. As students learned in chapter 4, anything that increases production costs causes the S curve to shift up: In order for sellers to be willing to supply the same quantity as before, they must receive a higher price to compensate them for the increase in their costs. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Kedua Kasus Memberikan Hasil Yang Sama! Dampak pada P dan Q, serta tax incidence adalah sama, meskipun pajak dikenakan pada pembeli dan penjual! P Q Hal yang penting adalah: pajak mendorong adanya harga yang dibayar pembeli dan harga yang diterima penjual D1 S1 PB = $11.00 Tax $10.00 500 PS = $9.50 Whether the government makes buyers or sellers pay the tax, the effects are the same: - the price buyers pay rises (in this case to $11) - the price sellers receive falls (to $9.50) - the equilibrium quantity falls (to 430) - the incidence of the tax is the same (here, buyers pay $1 of the tax, while sellers pay $.50 of the tax on each unit) This should make sense if students think it through: A tax on buyers means buyers will have to pay more, which causes their demand to fall. The fall in demand hurts sellers, forcing them to reduce their price. Similarly, a tax on sellers is like a cost increase, and sellers pass along a portion of that increase to buyers in the form of higher prices. The equivalence of taxes on buyers and taxes on sellers means that we can ignore whether the tax is imposed on buyers or sellers. All that matters is the size of the tax. So, in future problems, we can think of the tax as a wedge between the price buyers pay and the price sellers receive. On a supply-demand diagram, this wedge is a vertical line segment (shown in green on this graph). You can think of taking a toothpick the size of the tax and wedging it between the S and D curves. The quantity at which the toothpick fits just snuggly is the new equilibrium quantity. Students will have a chance to practice this in a moment with an exercise. One last remark: Someone once said “if you want less of something, tax it.” A tax on any good or service causes a fall in its quantity. This is because people respond to incentives, and the tax gives buyers an incentive to buy less, and sellers an incentive to produce less. 430 CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

A C T I V E L E A R N I N G 2: Effects of a tax Q P S The market for hotel rooms D Pemerintah memberikan pajak atas pembeli $30 per room. temukan Q, PB, PS, yang baru dan incidence of tax. 23

A C T I V E L E A R N I N G 2: Answers Q P S The market for hotel rooms D Q = 80 PB = $110 PB = Tax PS = $80 PS = Incidence buyers: $10 sellers: $20 24

Elasticity and Tax Incidence CASE 1: Supply lebih elastis dari demand P Q Pada kasus ini, pembeli menanggung beban pajak yang lebih dari penjual D PB S Beban pajak ditanggung pembeli Tax Price if no tax Beban pajak ditanggung penjual PS We have just seen that tax incidence is not affected by whether the government makes buyers or sellers pay the tax. So what, then, does determine tax incidence? Turns out it’s elasticity – specifically, the price elasticities of supply and demand. There are two cases: 1) supply is more price-elastic than demand (this slide), and 2) demand is more price-elastic than supply (next slide). When supply is more price-elastic than demand, sellers are relatively more responsive to changes in price, and the supply curve is less steep than the demand curve. Buyers have relatively fewer alternatives, so they have to “eat” most of the price increase caused by the imposition of the tax. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Elasticity and Tax Incidence CASE 2: Demand lebih elastis dari supply P Q Pada kasus ini, penjual menanggung beban pajak yang lebih tinggi dari pembeli. S D Beban pajak pembeli PB Tax Price if no tax Beban pajak penjual The size of the tax is the same in this diagram as in the one on the preceding slide. When demand is more price-elastic than supply, buyers are relatively more price-sensitive, and the demand curve is less steep than the supply curve. Buyers have relatively more alternatives, so they can avoid most of the tax. Sellers are less flexible, so they have to “eat” a greater share of the price increase caused by the tax. PS CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Elasticity and Tax Incidence buyers’ price elasticity > sellers’ price elasticity, pembeli akan lebih mudah meninggalkan pasar ketika pajak dikenakan, sehingga pembeli akan menanggung beban pajak yang lebih kecil dibandingkan dengan penjual . sellers’ price elasticity > buyers’ price elasticity, the reverse is true. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

CASE STUDY: Who Pays the Luxury Tax? 1990: Congress adopted a luxury tax on yachts, private airplanes, furs, expensive cars, etc. Goal of the tax: to raise revenue from those who could most easily afford to pay – wealthy consumers. But who really pays this tax? This case study comes right from the book. If you’re pressed for time, you can delete it and let students read it on their own. It does not introduce any new concepts, and most students do not find it difficult. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

CASE STUDY: Who Pays the Luxury Tax? The market for yachts Demand is price-elastic. P Q S Jangka panjang, supply inelastis. D Buyers’ share of tax burden PB Tax perusahaan yang membangun yacht membayar sebagian pajak yang lebih besar Sellers’ share of tax burden Demand for yachts (and other luxury items) is price-elastic: if the price of yachts rises, rich consumers can easily avoid the tax by spending their millions on some other luxury item. Supply of yachts is less elastic, especially in the short run. It is difficult for the companies that build yachts to re-tool their factories and reeducate their workers to produce some other product. Hence, companies that build yachts (and companies that sell other luxury items) pay most of the tax, and the rich pay relatively little of it. PS CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

KESIMPULAN: Kebijakan Pemerintah dan Alokasi Sumber Daya Setiap kebijakan dalam bab ini mempengaruhi alokasi sumber daya masyarakat. Contoh 1: pajak pada pizza mengurangi keseimbangan kuantitas pizza. Karena perekonomian memproduksi pizza lebih sedikit, beberapa sumber daya (pekerja, oven, keju) akan menjadi tersedia bagi industri lain. Contoh 2: upah minimum menyebabkan surplus tenaga kerja, pemborosan sumber daya. Jadi, penting bagi para pembuat kebijakan untuk menerapkan kebijakan tersebut dengan sangat hati-hati Recall one of the 10 principles from chapter 1: Markets are usually a good way to organize economic activity. This means that, in absence of market failures (which we will learn more about in later chapters), the allocation of resources resulting from the free market equilibrium is optimal. Hence, government policies which alter this allocation tend to make the economy worse off. When we study market failures later, we will see that government policies can – in principle – improve on the market’s allocation of resources, and make society better off. First, though, we need to learn how to measure the impact of government policies like taxes on society’s well-being, as well as define what, exactly, we mean by “well-being.” This field of study, called “welfare economics,” is the topic of the next three chapters. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Ringkasan Bab 6 Price ceiling adalah kebijakan harga maksimum barang dan jasa. Contoh: rent control. Jika price ceiling dibawah harga keseimbangan, itu adalah binding dan menyebabkan shortage. Price floor adalah kebijakan harga minimum pada barang dan jasa. Contoh: upah minimum. Jika price floor diatas harga keseimbangan, itu adalah binding dan menyebabkan surplus. Surplus tenaga kerja yang disebabkan oleh upah minimum akan menimbulkan unemployment. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES

Ringkasan Bab 6 Barang yang dikenakan pajak akan berdampak pada harga yang dibayar pembeli meningkat dan harga yang diterima penjual turun, menyebabkan keseimbangan kuantitas turun, meskipun pajak dikenakan pada pembeli atau penjual. incidence of a tax adalah pembagian beban pajak antara pembeli dan penjual, dan tidak dipengaruhi apakah pajak dikenakan kepada pembeli atau penjual. incidence of the tax dipengaruhi oleh elastisitas harga dari supply dan demand. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES