Question

Describe the price elasticity of supply or demand of laptops at Walmart. Explain how two non price factors that impact the demand of the laptops. Explain how two non price factors impact the supply of laptops. Define the industry and the market equilibrium associated with laptops. Predict the effect of changes in supply and demand on the market equilibrium.

Answer 1

Answer -

The main products offered at Walmart are home décor, clothing, groceries, and electronics. They also offer services such as pharmacies, vision, and garden centers. The supply and demand of cameras are price elastic because if the price goes up the demand will decrease. Cameras are not a necessity or a need, this makes them fairly price elastic. The supply and demand is greater for cameras in richer areas of the world such as Canada and the United States. The supply and demand for cameras at Walmart in places such as Mexico is not nearly as high.

Two non price factors that impact the demand of the laptops -

Tastes and Preferences

Consumer tastes and preferences play a large part in determining the level of demand for a given product. This is used primarily to mean an option that has the greatest anticipated value among a number of options’. When the preferences of a consumer for any particular product increases the demand curve shifts towards the right and when the preference of a consumer for any product decreases the demand curve for that product shifts towards left. There are many computer companies in the market which produce desktop and laptop, table (3) shows how the price and consumer preferences of various laptops can shift the demand curve.

Substitutes

Substitutes are those products that can be used in place of main product. In computer market the manufacturer keep changing the price of its product very often, for example, if the price of ACER laptops increase, the demand curve of dell laptops shifts to it right, subsequently the prices of other laptops also shifts to its right, on the contrary if the price of ACER laptops decrease then the demand curve of DELL laptops shifts to its left.

Two non price factors impact the supply of laptops. -

Increase in technology

A narrow definition of technology is nothing but a cost-reduction or improvement in the product. Technology allows the firms to generate any given item at lower cost. The new innovation and advancement had made a huge improvement in the computer market, this has radically declined and lowered the cost of computers in the market, and this also has improved the computers at every alternative period and has also lowered the cost of production of computers. Previously, the price of one laptop was on an average about ‘800 to ‘900 and was very difficult for everyone to afford a laptop or a desktop but with the improvement and innovation in the computer field had made the price of computer to an average of about ‘500 it very easy for every individual to buy a computer of their own. This technological change, the supply curve of computers moves towards its right as there is an increase in the quantity supplied.

Change in the size of market

Whenever the size of the market changes the supply curve shifts. The computer market has always experienced a change of gear from 1950 till present, in 1950 there were only few company who manufactured computers like IBM, Apple, and today with growing IT sector there are more than dozen of companies manufacturing computers with all different prices and configuration: highest annual growth rates have given way to more diffident annual returns, and the market is entering into a mature stage of growth. Even after 2004, we foresee that the fortunes of the computer industry will improve; annual growth in the market’s value will be less than 7%. In short, as more firms entered the market the output of computers increases even if the price of the computer remains steady and thus this lead to the supply curve shifts towards its right and if there is any shrink in the computer market then the supply curve tends to shift towards it left.

                           

           In this environment, now we have all the necessary tools to resolve these paradoxes presented in beginning and during this episode. With the increase of the demand in computer supply, still there are frequent fall in the prices of computers this is because of the forces mentioned above. Supply and demand are the main reason for these forces to come in the act for the rapid decline in the price of the computers. During this price theory, whenever we refer to a change in the price of the product, we mean a transform in that product’s relative price too. All the forces (factors/determinant) that raise the price of computers when other prices stay constant tends to raise the price of that product faster than the price level during the inflation. We can conclude that the demand for computers has clearly increased eventually this is due to the higher incomes and also the changing preferences towards computers. Technology had played a very important role in the changing of the computer prices in recent time. There are four laws of increased and decreased in the price and quantity of computers, they are:-

a) Increase in demand, price and quantity both increases

b) Decrease in demand, price and quantity both decreases

c) Increase in supply, price decreases and quantity increases

d) Decrease in supply, price increases and quantity decreases