Why the price of computers keep falling despite increasing demand

Why the bell of computers keep decaying despite change magnitude look atIntroductionNow a twenty-four hours, computers are the main source of connectivity among people. The major share of work i.e., college assignments, teaching lessons, work presentations are mostly dependent on the computers. And as well as doing a long distant chat for almost free, computer or information technology has enabled human being in coming issue with the speedy solutions of almost everything. (http//en.wikipedia.org/wiki/Personal_computer)A personal computer (PC) be toilet any general-purpose computer whose size, capabilities, and original gross sales damage make it reusable for individuals, and which is intended to be operated directly by an end user, with no intervening computer operator.Personal computers Software applications include word processing, spreadsheets, databases, Web browsers and e-mail clients, games, and unnumerable personal intersection pointivity and special-purpose sof tware. Modern personal computers often turn out high-speed or dial-up connections to the Internet, completelyowing access to the World Wide Web and a wide honk of new(prenominal) resources.In the free trade condition the toll of a product pass on be determined by the train and the market make out of computers. In a market, Supply and bespeak is an economic model of cost determination. It concludes that in a competitive market, price will function to equalize the step beged by consumers, and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity.If we look at computer market, the demand is keep on increasing and also at the same time the market put up also increasing. According to the law of demand and provision, when the demand is make upd, the price goes up the free market. But in this particular computer market, demand is growing but, the price comes down gradually. That is the wonder of this assignment and, in this piece of work I am going to hold forth the best possible reasons to that behavior. http//www.channelweb.co.uk/crn/news/2258012/uk-business-pc-market-declineIn this assignment it will be discussed and analyzed the following topics.Explanation for why the price of personal computers has continued to angle of dip nonetheless in the face of increasing demand.ConclusionBackground Computer MarketThe UK personal computer market in 2008 was worth 12.81bn at end-user prices, an increase of 4.2% over 2007 and its highest level of output since 2000. However, it led to a fall of 8.2% in sales to 11.77bn during the recession in 2009.During the period from 2005 to 2008 personal computers (PCs) reported a high(prenominal) annual growth, whereas peripherals and add-ons declined in tally value sales. Therefore it was led to a negative growth of 3.3% over the period.In the consumer market, the better performance of PCs over the period, particularly, is attributed to sales of portables and particularly n et books in the ult year. Mobile computing is continuing to drive net book sales. Desktop computers have become less mesmeric and are in decline with more(prenominal) portables now being sold than desktops.Manufactures are expecting a rebound in sales in 2010 and full recovery by 2011 with positive.The principal analyst Ranjit Atwal at Gartner says The UK market for computers showed growth in Q4 for the first time this year. According to him, 70 per cent of the total PC market in the UK has also become heavily dependent on busy PCs.The percentage of the UK market shareAcer held on to the top spot in the UK with 19.1 per cent market share, HP held the second with 18.9 per cent. Dell was the third with 16.5 per cent, followed by Toshiba and Samsung with 10.4 per cent and 6.5 per cent respectively.He added that the total UK market in terms of shipments in Q4 was 3.8 meg units. Even in the Western Europe Acer held 23.1 per cent of the market. HP was second again with 21.3 per cent , Dell was third with 9.9 per cent and Asus and Toshiba took fourth and fifth blank with eight per cent and 6.2 per cent market share respectively.There is a portentous growth in vendors such as Apple, Samsung, Lenovo and Sony also putting significant pressure on the top five vendors in Western Europe. Research has found that the UK computer market continued to struggle in 2009s closing string as western European counterparts return to growth.Market watcher IDC preliminary figures reveal that UK personal computer shipments in Q4 fell 1.7 per cent annually to 3.8 million. notebook shipments were up 2.3 percent year on year to 2.9 million, while the desktop market slumped 12.8 per cent, with 878,000 units shipped.The emerging markets were collapsed when the crisis came, but now they are back to double design growth.Likewise we observed that the market for the computers is expanding day by day in millions, but the constitute of the computers are coming down gradually which is co ntrarily to the guess of the Demand and Supply. Therefore we are required to examine in deapth that, what are the triggers for such situation in genuine terms.http//www.mynewsdesk.com/uk/view/pressrelease/research-and-markets-computer-Explanation for why the price of personal computers has continued to fall even in the face of increasing demand.In this particular computer market, we understand that the price of personal computers has continued to fall even in the face of increasingly high demand, which is contrary to the law of demand and egress. That happens mainly because of the competition and increasing efficiency few more other reasons.In this case, Price remains constant or reducing and change in any other determinants causes demand or supply to rise. That results shifts in the demand of supply curves to the respectable or to left depending on the circumstances. Any other factors can be,Demand side The price of the other product. ie. Substitutes and complements.IncomePopul ationPreferencesFuture price expectationsSupply side The price of other product, ie. Price of substitutes and complementsThe price of factors of production used to produce the computer. (land, labor, capital)Advancements of technologies.No of producers or size of the market.Future expectations.Now we will look at the demand side of the computer market.In the computer market in that respect is a huge growth in demand day by day mostly due to the following reasons..Price of the other productSubstitutes In todays world, there are no closer substitutes to the computer. People are using high tech mobile phones to do most of their computer related work for example sending and receiving e mails. Still it is not a closer substitute. Therefore the demand is increase and the demand curve is shifted to the practiced, increasing the price. Please see the diagram below.Complements price of the complements also becoming lower when compared to the past few decades. In general, a companys strate gic interest is going to be to get the price of their complements as low as possible. The lowest sustainableprice would be the commodity price the price that arises when you have a bunch of competitors offering indistinguishable goods. So The smart companies try to reduce its complements price in order to capture the market.Ex. When IBM designed the PC architecture, they used off-the-shelf parts instead of custom parts, and they carefully documented the interfaces between the parts in the IBM-PC adept Reference Manual. As long as you match the interface, you can be used in PCs. Within a short time fully grown event of companies started up offering storehouse cards, hard drives, graphics cards, printers, etc. Cheap add-ins meant more demand for PCs. Please refer the diagram below.Increment in certain incomeThe Income of the consumers has been increased. The effect that income has on the amount of a product that consumers are willing and able to buy depends on the type of good we re talking about. For most goods, there is a positive (direct) relationship between a consumers income and the amount of the good that one is willing and able to buy. Being considering the computer is a normal good, when income rises the demand for the computers will increase.The higher the level of aggregate and/or personal income, the higher the demand for a typical commodity as a general. Where the income is higher more of a good or service will be chosen at a given price. Thus determinants of demand normally utilize close to form of income measure, including Gross Domestic Product (GDP).If you look at the following statistics the real income of the consumers have heen increased.Real family disposable income per head1 and gross domestic product per head2United KingdomIndex numbers (1971=100)Gross domestic productHousehold Income1971100.0100.01972103.7108.31973111.1115.11974109.7114.11975109.0115.01976111.8114.31977114.5111.71978118.2119.81979121.4126.71980118.8128.81981117.312 8.41982119.7128.31983124.1131.01984127.4135.91985132.0140.71986137.3146.71987143.5149.21988150.7157.51989154.2165.11990155.4172.61991153.2176.01992153.4180.81993156.8186.21994163.6188.81995168.5193.71996173.4199.71997179.1208.11998185.6212.41999192.0218.52000199.5227.72001204.5237.82002208.7242.62003214.6249.92004220.5251.92005225.1258.92006231.5262.72007238.5262.91 Adjusted to real terms using the expenditure deflator for the household sector. See Appendix, Part 5 Household income data sources.2 Adjusted to real terms using the GDP deflator.Source Office for National Statistics presidency Actuarys segment General Register Office for Scotland Northern Ireland Statistics and Research AgencyTherefore, the demand curve for computers has definitely shifted to the right from D1 to D2 reduce to increment in real incomes. Therefore, there has been a rise in their preferences. Please refer the diagram below.http//www.econport.org/content/handbook/Demand/Factors.htmleal3.3 Consumer Taste, Fashion, Trend and PreferencesIt is a real fact that all markets are do by collective and individual tastes fashion trend, and preferences. These patterns are partly implanted by information and knowledge of products and services and partly shaped by culture, including the influence of advertising. Because of these differences in taste and preferences, different societies use forest products differently.As the mini-notebooks provide better functionality at the lower price points now a days they are becoming more appealing. Mini notebooks are highly demanded and it has become fashion and trend due to consumer preference.If you refer the diagram below, when the demand is increased, the demand curve is shifted to the right increasing the price.PopulationAccording to the following table, the state of UK has been increased and as a result the aggregate demand for computers have been increased. dining table 1.1Population1of the United KingdomMillions19711981199120012007201120212031Unite d Kingdom55.956.457.459.161.062.867.271.1England46.446.847.949.551.152.756.860.4Wales2.72.82.92.93.03.03.23.3Scotland5.25.25.15.15.15.25.35.4Northern Ireland1.51.51.61.71.81.81.92.01 Mid-year estimates for 1971 to 2007 2006-based projections for 2011 to 2031. See Appendix, Part 1 Population estimates and projections.Source Office for National Statistics Government Actuarys Department General Register Office for Scotland Northern Ireland Statistics and Research AgencyWhen the population is increased the demand is increased, the demand is increasing and demand curve shifts to right increasing the price of the computer from P1 to P2. Please refer the diagram.Now we will look at the Supply side of the computers.Reduction of prices of factors in productionProduction cost is a main criterion in deciding the product price. If input costs decline, firms respond by increasing output. As a result borderline costs are dramatically reduced and consequently supply is increased. Therefore there has been a huge fall in price and quantities traded have been travel dramatically.In the long run, when an industriousness expands the cost of industry also decreases. As the industry produces more output, the minimum average cost of production for each firm decreases with the decrease in costs. (Economies of scale) The decrease in costs whitethorn reflect lower input costs which reduce the minimum point of the average total cost curve as the industry grows. As the industry expands and if there are economies of scale in the production of an important input costs may decline.A decrease in input costs shifts the supply curve to the right from S1 toS2 increasing the Equilibrium quantity from Q1 to Q2. The price will be decrease from P1 to P2. Please refer the to a higher place diagram.http//www.flatworldknowledge.com/pub/1.0/introduction-economic-analysis/29486Advancement in TechnologyBecause of the technological advancement, the computers can be produced at a lower cost when compar ed to the decades ago. As technology has improved, he price of the computers have declined radically lowering their cost of production. Specially advances in communications technology.http//www.web-books.com/eLibrary/ON/B0/B63/021MB63.htmlLet us look at another indicator of the phenomenal change in computers. According to Bureau of Labour Statistics, central processing unit (CPU) speed rose 1,263%, system memory increased 1,500%, hard drive capacity soared by 3,700%, and monitor size went up 13%Between 1993 and 1998.Therefore the supply curve shift to right from S1 to S2 by reducing the price from P1 to P2.http//www.web-books.com/eLibrary/ON/B0/B63/021MB63.htmlThe competitive advantage of high-tech laptops and NotebooksNotebook PC /LaptopsVarious types of notebooks and laptops with different configuration and specifications are manufactured by different companies. The most recognized companies in dealing with laptops are Sony, Vaio, Toshiba, Dell, Fujitsu, Lenovo ect. Priced are dep ended on configurations. Laptops with general features and lesser configuration are available at cheaper grade and notebooks with higher configuration and extra specifications are bit expensive. The processor may be Intel Dual inwardness and it may be enabled with widows or vista amplitude operating system.From one notebook PC to the other the data speed and the RAM capacity varies depending on the configuration. The memory may range from 1GB to 4GB or higher memory. Some laptops are enabled with TV tuner and built-in cameras for extra usage. The capacity of the hard drive varies, starting from 64GB to 500GB. When compared to the desktops, the hard disk and RAM have smaller sizes. There is a better advantage as the laptops Central Processing Unit is produced less heat and also save power. They may be of Intel Core, Core 2 Duo, Premium M, VIA Technologies etc.http//www.articlesbase.com/laptopsFollowing are the most attractive features in the Note books and laptops.LCD displayKey board and a touchpad, equivalent of mouseDisplay primarily ranges from 13 inches to 17 inchesWeighs between 1.4 to 5.4 kilogramsThickness ranges between 18-38 mmComes in folding designRechargeable batter extractible memory facility which ensures large storage of dataAvailability of many ports for USB connectivitysExpandable memory cards such as Mini PCI for a large storage of data.Portable, cheap priced, stylish, folding designBoth a laptop and notebook have more advantages as they are ultra-portable, durable and they can be used while travelling easily. We can have immediate access and can have our work done instantly and these are always up-to-date, as all files can be saved in a single location. With the help of wireless networks like Wi-Fi and cellular modems, we can access Internet even while on the go.The above mentioned advancements in technology, the computers gets technically better and better as the months ago for the same price, and this will shift the supply curve to th e right.Retrieved from http//www.articlesbase.com/laptops-articles/laptop-notebooks-are-best-substitutes-for-our-traditional-computers-745511.htmlThis can be seen in the diagram above. The quantity supplied has raised hugely, from Q1 to Q2.The equilibrium price has fallen from P1 to P2, a fairly large relative drop.3.7 Expansion of the computer market. late more and more computer product chains have been entered to the market and it has led size of the industry grown. When more firms enter a given industry in short, output increases even as the price remains steady. The supply curve is shifted to the right decreasing the price of the product, when industry grows. Following are the main competitors in the UK market.United Kingdom PC Vendors)Company3Q09 Market Share (%)3Q08 Market Share (%)Acer24.217.4Dell Inc.18.320.9Hewlett-Packard17.519.1Toshiba6.58.6Apple Computer5.03.8Others28.630.2100.0Total100.0Note Data includes desk-based PCs and mobile PCsSource Gartner (November 2009).Pleas e refer the diagram.The rapid increase in the number of firms, together with dramatic technological improvements, led to an increase in supply, shifting the supply curve in diagram to the right from S1 to S2. Price is reduced to P1 to P2.CONCLUSIONLet us consider the factors those affected to fall in computer price in real terms which resulted both(prenominal) the demand curves and the supply curves led to right shift.Increased preferences due to advanced technology increase in population and the increment in real income, there is a huge increase in demand. And the demand curve shifted to the right from D1 to D2 in the diagram. The price was increased from P1 to P2.Suppliers seek for a greater share of the market by having strategies to gain consumers demand on their product. This is done so by increasing the value of their product. But there has also been a huge shift to the right in the supply curve for computers than the shift in the demand curve. Please refer the diagram above in relation to supply curve.In computer market particularly there are simultaneous shifts of both demand and supply curves. Combining both shifts generates an obvious change in quantity, but a questionable change in price. If an increase in demand increases equilibrium quantity and an increase in supply increases equilibrium quantity, then an increase in both MUST increase equilibrium quantity.In relation to the price, the demand increase (right shifts) results in a higher price, and the supply increase (right shift) leads to a lower price. The price is in determinant and it depends on the relative change of both curves. In the computer market, supply shifts relatively more than demand, therefore the supply induced lower price outweighs the demand-induced higher price, and the price is lowerThe price change is in determinant and we have to consider the relative change in the supply and the demand curves. Therefore, the exact reason for the question in this assignment is, even thoug h the demand is increasing, the supply is also increasing but, at a rate higher than the demand increasing rate. You can notice in the diagram above, that the supply curve is shifted to the right at a higher rate than the rate at which the demand curve is shifted to the right. Therefore the price reduces from P1 to P2.Therefore, I conclude that the rapid increase in the number of firms, together with dramatic technological improvements, led to an increase in supply. The reason for the fall in equilibrium price that is the answer to the assignment question is market supply is relatively more than the demand and it results a lower price.Reference listWeb sightshttp//www.microsoft.com/uk/business/news, 26, shew 2010, 8.15 a.m.http//en.wikipedia.org/wiki/Personal_computer, 26, March 2010, 8.25 a.m.http//www.channelweb.co.uk/crn/news, 26, March 2010, 9.00 a.m.http//www.econport.org, 26, March 2010, 9.10 a.m.http//www.econport.org, 26, March 2010, 9.40 a.m.http//www.amosweb.com, 26, Marc h 2010, 9.55 a.m.http//www.slideshare.net, 26, March 2010, 1.10 p.m.http//www.flatworldknowledge.com, 26, March 2010, 1.25 p.m.http//www.web-books.com, 27, March 2010, 9.20 a.m.http//www.articlesbase.com, 27, March 2010, 9.30 a.m.http//en.wikipedia.org26, 27March 2010, 11. a.m.htpp//www.microsoft.com/uk/business/news/driving-revenue/UK-PC-sales, 27March 2010, 11. a.m.http//news.bbc.co.uk/1/hi/business/4704927.stmBooksParkin, M. 2008 (8th edition)Solman, J. 2007 (2nd edition),Economics, Pages 48-65