Demand And Supply Of The Computer Industry

This essay explains the factors that affect the Demand and Supply of computer industry in world market. Heartfelt attempt is made in the report for the analysis of the past and present computer technology market. The annual value and sales of computer industry are collected to attain this essay. Graphs are provided in all sections throughout the essay to understand the factors well. Different websites and books from our institution were of great help.

Supply and demand is the backbone of a market economy. Perhaps it may be one of the most fundamental concepts of economics. Demand means how much (extent) of a product or service is needed by buyers. The quantity demanded is the amount of a product people are ready to buy at a convinced price. The connection between cost and quantity demanded refers to the demand relationship. Supply means how much the market can bid. The quantity supplied is the amounts of certain good producers are willing to supply when receiving a definite price. The relationship between price and how much of a good or service is supplied to the market is known as the supply relationship. Therefore, price is a reflection of supply and demand.

The international computer industry market experiences boom and bust economic cycles. A boom and bust cycles refers to the rapid increase in prices, followed by a period of falling computer prices. This has occurred on numerous occasions in the international computer market, most notably during and after Lawson boom of the late 80’s. (In the Lawson boom the world economy grew very swiftly, but, this development proved to be indefensible leading to price rises and later a recession in 1991.) The computer market is often unpredictable because of various factors like limited supply, changing technology, buyers take out large mortgage to get on property ladder, instability in mortgage lending, boom and bust in economic cycle, speculators, poor memories. The international computer market has an influence over wider economy. e.g. when the computer prices are falling, consumer spending tends to decrease. It is important to try and be able to predict future movements in HYPERLINK “http://www.housingmarket.org.uk/housing/forecasting-future-outlook-for-the-housing-market/”the housing market because the technological market influences the economy and individual computer owners.

FREE MARKET

The free market means producers can enter and exit very easly in to the maket .it is a modern concept,and no more restriction in this market,by the advantage of this consumers can give very cheap products, in this market high competions are heald that leads to price reduction ,in the case of combuter industry so meny manufacture are indroduce their most modern technology in the market , but they cant sell with high price in this market ,becouse the technology will change on next day.or the other manufacturs are bring to market very high resolution scheems with low price,this process is a constant one in this market

THE COMPUTER PRICES OF A FREEMARKET

Research shows that the most significant relationship in industrial technological prices is that between average computer prices and average income. It is a ratio entrenched in common sense, and equates what people are ready to pay for a technology and how long they take to earn the money to pay for it. [John Sloman, 2002]

The inter national computer industry have experienced their key periodical fall in a decade. According to the Centre for Economics and Business Research (CEBR), the average price of computer price will decrease by 20% among the fourth quarter of 2010 and the last part of 2011. There is an excellent chance that they will raise even more quickly. The prophecy comes after Halifax reported that house prices rose by 1.1% in July the second rise in three months. The CEBR said that prices are likely to go down by a further 3% throughout the rest of 2009, which would take the total peak-to-trough go down to around 24% compared with the third quarter of 2007.

DEMAND AND SUPPLY

Demand can be either high or low. Some items have a small supply and high demand. People are ready to pay more money for these rare items. Likewise supply can be big, small, or in between. A big supply means many choices or huge amount and a small supply means few choices or a small amount.[Janeen R. Adil, 2006]

The market price of a good is determined by both the supply and demand for it. Today the supply-demand form is one of the primary concepts of economics. The price level of a good essentially is determined by the point at which quantity supplied equals quantity demanded. Demand and supply can be illustrated by schedules and curves that illustrate how quantities demanded and supplied will vary with price. [Les Scher, Carol Scher, 1996]

LAW OF DEMAND

The law of demand states that, if all other factors stay the same, the higher the worth of a good, the less people will demand that good. It can also be stated as; the higher the price, the lower the quantity demanded. The sum of a good that buyers purchase at a higher value is less because as the cost of a good goes up, so does the chance cost of buying that good. So, public will obviously avoid buying a product that will force them to miss the consumption of something else they value more. The graph shows that the curve is a downward slope.

A, B and C are points on the demand curve. Every point on the curve reflects a straight connection between quantity demanded (Q) and price (P). So, at point A, the quantity demanded will be Q1 and the price will be P1, and so on. The demand connection curve illustrates the depressing relationship between price and quantity demanded. The higher the price of a good the lower the quantity demanded (A), and the lower the price, the more the good will be in demand (C).

LAW OF SUPPLY

The law of supply demonstrates the quantities that will be sold at a certain price like the law of demand. But disparate the law of demand, the supply connection shows an rising slope. This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price for the reason that selling a higher amount at a higher value increases profits.

A, B and C are points on the supply curve. Each point on the curve reflects a direct correlation between quantity supplied (Q) and price (P). At point B, the quantity supplied will be Q2 and the price will be P2, and so on.

FACTORS AFFECTING THE PRICE OF COMPUTER

DEMAND SIDE FACTORS

Economic Growth

Interest rates

Consumer confidence

Comptetors price

Demographic factors

Speculation

Inherited wealth

Unemployment

Economic growth

Increasing incomes make possible for people to pay out more on trading a computer. However, the proportion of technology prices to income can vary significantly. For example, between 1995 and 2007, the ratio of computer prices to incomes has increased considerably. It is the fact that if the economy goes into a recession and unemployment rises, the demand for buying technology would fall drastically.

D2

D1

P

Q

O

In this diagram, D1 was the previous demand curve and D2 is the current demand curve. The shift in D1 to D2 shows the reduction in demand ofcoputer in UK at present.

Interest rates

Latest computer price data as released by the Halifax points that international information prices have plunged by further 20% from the top of August 2007, which has satisfied much of the real forecast made in August 2007 for a least fall of 15% for the computer market and 25% for industrial use, thus this analysis seeks to project the predictable trend for computer prices for the next 2 or 3 years.

Interest rates control the rate of paying for a mortgage. Interest rates are very essential as mortgage repayments are normally the key part of a computer monthly expenses. In the world, the mainstream of computerhave a ready cash which means an boost in rates will cause the price of computer decrease , deterring people to buy. Hence changes in interest rates can have a instance delay of up to 18 months prior to full effect is noted on demand for computer. It is also vital to consider real interest rates or interest rates-inflation.

Consumer confidence

Throughout the time of high consumer confidence, the public are more eager to take out unsafe mortgages to be able to buy a computer. For illustration, in the period 2001-07 100% mortgages and interest only mortgages were quite common. In the early periods, public were confident regarding the computer market and so took out mortgages with a top debt to income ratio.

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SUPPLY SIDE FACTORS

Income

Supply and Income (of the public) are interconnected. The present credit crunch leads to lack of money among public. This results in the less income with them. So people deliberately avoid buying new houses. Instead they sold their existing computer and moved to advanced technologys. So this lead to a tall increase in the supply of the computers in the computer market . The guardian reports that the number of computers being built in England rised by 63% in the second quarter of the year to 29980.

P

Q

O

S2

S1

In this diagram, S1 was the previous supply curve and S2 is the current supply. The shift in S1 to S2 shows the increase in supply of houses in UK at present.

Cost of production

Cost of production per item is the costs related with making divided by the amount of item produced. Present credit crunch leads to a swift decrease in the cost of production of computers in the UK in recent years.

P

Q

O

S2

S1

In this diagram, D1 was the previous demand curve and D2 is the current demand. The shift in D1 to D2 shows the decrease in demand of houses in UK at present.

Unemployment

A strong connection between unemployment and the computer Market exist. That is, when unemployment is mounting due to recession, it results in the lack of income among the people. So the sold their existing equpment and stops buying new computer. This results in the increase in supply. If people are unemployed they will be not capable to pay for the mortgage payments.

The two main factors which lead to a steep fall in computer market are rising interest rates and rising unemployment. But the current situation is a little different. Interest rates are not so tall, but unemployment is growing up and an increasing number of people will be forced to keep the existing computer.beouase they dont have any need to buy new one

GENERAL FACTOR

AFFORDABILITY

A fascinating statistic points that last year’s computer price falls have made standard technology prices more affordable. At the acme of the credit crunch in July 2008, the price to earnings proportion reach a record of 5.86. But now it fallen to 4.56 (information by HBOS). This is still over the average for the past 20 years with an affordability ratio of 4.0 .

In this diagram, D1 was the previous demand curve and D2 is the current demand. The shift in D1 to D2 shows the decrease in demand of computer in UK at present.

D1

D2

P

Q

O

FUTURE PRICE PREDICTION OF HOUSING MARKET FOR UK

Considering house prices diminishing at present, it is tough to imagine that we need further 3.8 million computer. Most people are not capable or they don’t want to buy or they can’t get a mortgage. But, in the future, there are various factors causing increased demand for computer. They may be predicted as follows.

Rising Population (worlds population is expected to boost to 65 million in next 15 years)

Demographic Changes (For example, Higher divorce rates means more people living alone)

Aged population (more old people living alone)

Rising wealth means the youth want to leave home

Increase in number of educational requirment

Increase in the use of internet

Technicalise all the fields

Improved demand from overseas

Falling computer prices may lessen rough demand. But, if demand increases as predicted and present short levels of supply are maintained, prices are likely to be climb up.

According to the Centre for Economics and Business Research computer prices have got an additional 3% to drop before raising a pat next year. If things happens as the consultancy predicts, the price of a house will be 24% lesser in the first quarter of 2010 than at the peak prices witnessed in the third quarter of 2007. Property costs should then rise 2% more in next 12 months.

According to the Royal Institution of Chartered Surveyors (RICS) there could be a price rise over the entire of 2009. Both Lenders Halifax and Nationwide supposed that computer price rose in July. Nationwide believes there’s a “reasonable chance” that world computer prices will end 2009 privileged than when they started.

A description prepared by Oxford Economics for the National computer Federation forecasts property prices could be 20% more than this year’s average by 2014 due to a lack of supply. Prices will go down to 12.2% this year and an additional 4.6% in 2010, but a 1.1% rise in 2011 will be followed by yearly growth of 7.5%, 8.4% and 6.8%.

CONCLUSION

In this century all maters are directly related to the information technology. so that almost all pepoles need to by computers that leads to increased the sales in USA each house have one combuter,by the theory of “human wants are unlimitted,resoursess are limitted,limitted resourses are alternative use.” If one person by a computer and his ambitions never end becouase he is thinking about bying a new technological advantage one.in the case of computer industry all the market theorys are not applicable. becouse the manufacturs are introduce new version eventhoug they cant improve their price in the market. The main reason is todays technology should change tomarow or another producer defeat their technology, by introdusing an effective one or to overcome the demerits of the old technology. This is the main core thing in behind the computer in the combuter inddustry

The world computer market is expected to turn down by at least 15% through the next 2 years. Despite the 2012 Olympics,. Furthermore, the well-built expansion in the money supply and continuing population continues to bear the market. Yet an expected interest rate increase to 5.75% is improbable to influence the condition considerably. If prices go on increasing at the rate of the last quarter, they would rapidly rise to levels that would be obviously out of line with income, rents and other primary determinants of computer ravalution. In conclusion, international computer market price drift is on aim in the direction of a 15% drop in supposed terms by August 2009. This would compare to a real conditions drop of more than 20% and could drive the UK into recession during late 2009.