Business and managerial Economics

In recent years, the price of personal computer has continued to fall even in the face of increasing demand. Analyse the market for computer and explain with the aid of a diagram, how this has occurred

Introduction

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This essay paper will analyse the reasons as to why the prices of the personal computer are reducing, even though the market for these commodities has experienced an expansion, which has increased the demand for them. The market forces of demand and supply are analysed in this essay paper, to establish the reasons as to why such effects are being experienced at the market place.

Demand

As defined in (Salvatore et al 2003) demand is that willingness that consumers displays to have a good or service, which is coupled with the ability of that consumers to buy that particular good or service within a given period of time.

Figure 1

Source: Mankiw 2006

In most occasions, the demand schedule is used illustrate the relationship that exists between the price of a product or service, with the quantities of the commodities that consumers purchases at any given point in time. This is taken into consideration as all the other factors, that affect demand are assumed as not to be having any effect on demand as at that particular time, when the relationship between price and the quantity that the consumer will be willing as well as able to purchase at a given point in time.

The usual shape of a demand curve is downward sloping, whereby as the price of a commodity shifts to a high level the quantities that the consumers will buy of that commodity will reduce, and the relationship holds as the changes in the price of the commodity and the quantities differ. The down warding sloping shape is not the only shape that the demand curve can take.

There are special circumstances under which even though the price of the commodity will be raising the demand for that commodity will rise, thus the demand curve assumes an up-warding sloping nature. Such commodities which display the unique demand curve shape includes the goods which are called giffen goods, that are considered to be of an inferior nature and also taken as staple. The other second example of commodities that do not follow the usual shape of a demand curve is the Veblen good, which can be described as a commodity that has distinctive characteristics, which enable the consumers to identify it as fashionable. Thus the high price goes in hand to create a difference between the commodities with the rest (Mankiw 2006).

The other factors besides the price of the commodity, which determines the demand for a given commodity at the market place, include tastes as well as the preferences of the consumers, the number of people who will need the commodity amongst other factors like the government policies and the technological changes (McConnell et al 2004).

Supply

As defined in (Hubbard et al 2008) this is the given quantity of commodities, which the suppliers of a given commodity will be willing as well as able to provide to the consumers at the market place at a given period of time. The relationship between the quantities of commodities, which suppliers will be willing as well as able to provide to the consumers at the market place is illustrated using the supply curve.

Source: Thompson 2001

Supply links with the demand of the commodities as one of the key building block in conducting any form of market analysis. In short, the different characteristics of supply are used to illustrate the behaviours that the suppliers of the different commodities at the market place will display, in providing the commodities that they produce.

In order for a good analysis of the market for goods and services to be made, the various factors that that influence the supply of a commodity at the market place will need to be understood. In that way, the supply expectations for the future will be effectively estimated, in relation to its impact on the market price of the commodities (Thompson 2001).

In assessing the supply of a given commodity at the market place like in this case the supply of the personal computers, two approaches can be adopted to explain this concept. First and foremost, the supply of the personal computers can be looked at from the total production of these commodities, as well as the carryover of the stocks to the future. The second approach which can be adopted to explain the supply of the personal computers is the description of the behaviours, which the manufacturers of these products are likely to display at the market place at different stages of the product’s lifecycle.

In general, the supply for the personal computers can be looked at from the quantities of personal computers, that the manufacturers will be willing as well as able to provide to the market at given prices within a predetermined period of time. Considering the case of an individual manufacturer of personal computers, that producer can be willing to supply to the market higher quantities of personal computers, when the prices of these commodities go up, which are able to cover for the costs that are incurred in production. When the many suppliers supply behaviours are taken into consideration, they form an aggregate demand for personal computers at the market place (Davies and Lam 2001).

The market for personal computers

The prices of the personal computers have recorded a reduction trend in the market, as the demand for these products increases. Some of the contributing factors to the increase in demand have been attributed to the changes in tastes and preferences of consumers toward the use of technology, which has been embraced in all the sectors of the economy. The personal computers have been well marketed with their advantages emphasized on, thus making people prefer to use them in carrying out the day to day activities.

Most of the people who have been educated have managed to acquire these devices, leading to an increase in demand even as prices go down. With the changes in trends in the manufacture technological equipments such as personal computers, the consumers in the market have managed to adopt the use of the technology (Baye 2005).

Usually the supply of the commodities is represented by use of a supply curve, which demonstrates a positive relationship between the price of the commodity that is being supplied with the quantities, that the customers will be willing as well as able to provide to the market for their consumers. The general rule under supply is that as the price of the commodity shifts to the positive side, the amount of that commodity that the customers will be willing as well as able to provide to the market place will be high.

Unlike other commodities at the market place, there are those that have exceptional characteristics whereby even with increasing demand for those products at the market place, the manufacturers of those products will manage to offer the commodities at a low price. The reason for these is that, the supply of the commodities at the market place is usually affected by other factors other than the price of that commodity.

Some of the factors that affect the supply of the commodity at the market place include the technology, the number of suppliers providing that particular commodity as well as the prices of the raw materials that are used in the manufacture of the commodity. Other factors are the prices of other products, which the suppliers are intending to produce at the market place besides the climatic conditions (Png 2002).

When the suppliers are able to charge high prices for their commodities, they will be able to gather high profit returns. These high returns will enable the firms to expand the production activities, which will result in increased supply. In the case of the personal computers when they were first introduced to the market, the few suppliers that were producing them managed to charge high prices for them, which enabled them to make high sales returns. Eventually the manufacturers of the personal computers were able to conduct mass production, which increased the supply of the personal computers at the market place.

With the increased supply in the personal computers, the manufacturers were able to meet the initial needs and expectations of the consumers, which later on led to the changes in the needs and expectations of the consumers towards the performance of the personal computers. To address these needs, the manufacturers adopted strategies that enabled them to meet the changing needs of the customers, and also to market their products at the market place. One of the strategies that has been adopted is the use of the pricing technique, whereby the prices of the personal computers have been lowered leading to a high demand for these commodities (Dobbs et al 2000).

On the other hand, the various government policies have contributed to the reduction of the prices for the personal computers. This has been illustrated by the reduction of the taxation charges as well as the support, which has been rendered to the producers of the products which has enabled the producers to supply their products at low costs. With all these encouragements from the governments, and with the governments adopting the use of the personal computers in the various sectors of their operations, the manufacturers of the personal computers have been able to reduce the prices of their products even as the demand for the personal computers increase (Png 2002).

With the threat of obsolescence, and the with the technological equipments like the personal computers facing the threat, the manufacturers of the commodities find it necessary to lower the prices of the personal computers. This is to do away with the stocks which are likely to be faced out by the advances in technology, though the may still be useful in performing a number of activities. The threat of obsolescence has been posed by the continuous activities of innovations, that take place in the business environment, Which have led to the production of better perfuming personal computers (Dobbs et al 2000).

The factor inputs which are used in the manufacture of the personal computers such as labour as well as capital, and many others have also experienced reduction in costs. This is the case when taxes and other production policies have been reduced, leading to low costs that later on transform to low prices even as demand increases at the market place. And with the developing countries adopting the use of the personal computers, the demand of the personal computers has risen with the drop in the prices. The improvements in the management skills, which has lead to the adoption of the use of the computer systems has also contributed to the increase in the demand for the personal computers at the market place (Png 2002).

Finally with the high number of producers producing the personal computers at the market place like those of Dell, Microsoft, and Meccer among others, there has been increased competition in the supply of these commodities. This has lead to a downward pressure on the prices of the personal computers, even though the demand for these products is increasing at the market place.

The reduction in the price of the personal computers is one among the many strategies, which the manufacturers of these products are adopting in the supply chain management of the personal computers. The reason as to why the manufacturers of these products have managed to incur fewer costs, which has initiated the reduction in the prices of the personal computers is because they experience economies of scale in the manufacture of the personal computers (Keat and Young 2002).

Conclusion

The interplay of the demand and supply factors at the market place has lead to the decrease in the price of the personal computers in the face of increasing competition. This research paper has made an analysis of the different market forces which have lead to the marketing behaviour of the personal computers at the business environment.

References

Baye, M, (2005). Managerial economics and business strategy. 5^th edition. McGraw-Hill.

Davies H, Lam, P, (2001). Managerial economics: an analysis of business issues. 3^rd edition. Financial times/Prentice hall.

Dobbs I, Net library, Inc, Net library, Inc, (2000). Managerial economics: firms, markets and business decisions. Oxford University Press.

Hubbard G, O’Brien A, Scahill E (2008). Microeconomics. 2^nd edition. Pearson Prentice Hall.

Keat P, Young P, (2002). Managerial economics: economic tool for today’s decision makers. 4^th edition. Prentice Hall publishers.

  Mankiw G, (2006). Principles of economics. 4^th edition. Cengage Learning.

McConnell C, Brue S, Campbell R, (2004). Microeconomics: principles, problems and policies. McGraw-Hill professional.

Png Ivan (2002). Managerial economics. 2^nd edition. Wiley-Blackwell publishers.

Salvatore D, Diulio E, Bartley W (2003). Principles of economics: Based on Schaum’s outline of theories and problems of the principles of economics. McGraw-Hill professional.

Thompson, G, (2001). Microeconomics: A computational approach. M.E Sharpe.

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