Demand and Supply Model

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In Economics the market relations between prospective sellers and buyers of a good are known as demand and supply. The price and the quantity sold in a market is determined by the demand and supply model ......

The affordability of PC's have made it popular day by day and it's the main reason for thse in demand of PC's and to meet the high demand the supply has also increased.

Demand of Personal Computer in current world market is increasing continuously and it will be quite reasonable to consider PC's to be an essential appliance for the average household. This would mean that people would still buy computer despite higher prices and not buy more even the price goes down. Therefore we can consider that the demand for PC's is not so sensitive to the price changes and simply we can say relatively inelastic. However, from the very beginning the PC market was not like that comparatively the demand and supply of the PC was more price sensitive but day by day in the 21st century the utility of Pc is plummeted in such a height that we cannot imagine our day without computer. So within the last decade the PC market has changed and we can observe a transformational change in this market.

The fact that we consider the PC market as whole group and not a particular brand or a subgroup of PC's, further justifies the conclusion.

There are certain factors that affect the demand and supply of PC's and hence the price is automatically determined from the demand supply curve in supply-demand model.The increasing number of customers, preferences. Price of the factors of production used to produce PC, modern technology and handsome number of suppliers are the some most important factors that are liable for continuously increasing amount of demand and supply of PC in recent market and eventually the price goes down. In this essay we will examine all the factors mentioned above: how they affect the PC market insight.

All the factors outlined above is analysed separately with the help of supply-demand curve I below.

Meeting growing customer demands:

As population growing in it's own phase and also the modern world is mostly IT oriented as a result we cant imagine the daily busy life without PC. So it is very obvious the valued customer for PC increasing rapidly as well. The globe's largest software maker Microsoft has revealed a surprising 30% leap in profits, which it said was boosted by awesome demand for Personal Computers. And the rise in the sale is expected to continue, the software giant said. The size of the rise in profits was greater than the experts had forecast.

Strong demand for laptops, personal computers and servers helped push up fourth quarter profits at Microsoft, the company said on Thursday, 21 July 2005.

The software maker said net profits were $3.70bn (£2.1bn) for the financial period ending 30 June, 2005.

That was compared to$2.69bn(£1.54bn) in the same period in 2004.

The revenue during the period rose to $10.16bn from $9.29bn

DSG International one of the Europe's leading specialist electric retailers, the owner of Currys and PC world chain reported better than expected sales over the Christmas trading period as shopper snapped up televisions, personal computers.

As we know from economics theory the larger the population, the greater is the demand for goods. So when consumer increases the quantity demanded at a given price, it is preferred to as an increase in demand. Increased demand can be represented on the graph as the curve being shifted outward.

we can consider that growing consumer for PC determines / affects the demand of pc in world market.

If we place the change of the PC market in a demand- supply model we observe a clear shift of demand curve along the right side in diagram

At each price point, a greater quantity of PC is demanded as from the initial curve D1 to new curve D2. In the diagram this raises the equilibrium price from P1 to P2 also there has been an increase which has caused an increase in equilibrium quantity of PC.


When the suppliers' costs change for a given output, the supply curve shift in the same direction. For example, labour cost becomes less and less as major manufacturers shift toward Asian countries where there is a cheap and abundant labour force. Lower component cost will make Dell's marginal cost of producing a PC also low. Moreover in the competitive global market, their marginal revenue would be the price. Dell would undoutely want to maximise profit by making their marginal cost equal the marginal revenue. Therefore, they would certainly produce more and thereby capturing a greater share of the market.

Also government's plan to cut duty on computer component is the most important one. If we take a look at the India and Bangladesh PC market the n it will be very clear. In India and Bangladesh the govt already implemented zero duty import of computer parts and components to boost the computer market. This attempt attracted the computer industry to supply huge amount of computer in India and Bangladesh computer market.

If we analyse it in demand- supply model we can see the producer/supplier of PC in India and Bangladesh will be willing to supply more PC in market at every priceand this shifts the supply curve S1 outward to S2 - an increase in supply. This increase in supply causes the equilibrium price to decrease from P1 to P2. The equilibrium quantity increases from Q1 to Q2 as quantity demanded increases at the new lower price and we ob serve a right shift in supply curve.

China transformed its economy by shifting from technological nationalism to a more pragmatic strategy of developing national capabilities in conjunction with multinational corporation. Consistent with this transformation Chinna has revamped its industrial and technology policies to become a major producer ofcomputer hardware and a major market for computing products. In 2000, mainland chinese purchased more than 7 million PCs while computer hardware production grew to $23 billion.China's policies clearly drew on the development approach of other asia-pacific countries that became leaders in the global computer industry through the strong support of government and technology policies

Number of suppliers /producers:

The larger number of suppliers the greater is the supply of goods; an increase in the number of suppliers shift the supply curve rightward. The increasing demand and ease of entry to the market would allure more suppliers into the market, which would lead a larger supply.

Chinese computer market is a highly competitive one with a very large number of suppliers with small shares in in market. This means that they are more of price taker and can not increase the price without losing considerably in sales and illustrated by the flatter supply curve of the computer market. Increasing number of suppliers in Chinese market also implies a right shift in the supply curve leading to a lower equilibrium price and a larger traded quantity.


Consumer's perspective of computers has been changing over the years. Computers are no longer high-tech lab equipment but a common household media of entertainment, education and information.


Ever growing use of the internet incentive to buy computer. The Internet has revolutionized business communications and operations, just as the inventions of the telegraph, telephone, radio, fax machine and computer did the same. For small businesses like ImageStream, the Internet offers worldwide reach, an inexpensive mechanism for disseminating information, and a medium for inter- and intra-company collaboration regardless of geographic location.The internet is changing people's view of the world through their own journey of identity creation. People learn new information from websites and can communicate with people from all around the world. Our sources for identity building were very limited to our local surroundings until the internet emerged. Now we are forced to navigate through the ominous landscape of a global community. At first these views can be very worrisome, but as we explore the internet's qualities of exploration and ability to connect people, we find that the internet is wonderful tool for building a globalized identity.

1984 when it was noted that 8.2% of households in the US had a computer. Internet use did not start to be tracked until 1997 when 36.6% of the households reported computers with only 18% having access to the internet. By 2003, the numbers grew rapidly to 61.8% and 54.7% respectively (US Census Bureau, 2003). The growth of the digital network in the US has been fast.


Since PC can be considered as normal good , its demand will increase overtime as people's income increases also constant advances in computer technology allow computer manufactures to reduce production cost and supply more at a given price