1.Model the global market for personal computers.
In current world market, it is only reasonable to consider PC's to be an essential commodity for the average house hold. This would mean that people would still buy computers despite higher prices and not buy more in the case of lower prices.
Therefore, we conclude that the demand for PC's is not overly sensitive to price changes and is relatively inelastic; hence the steeper demand curve. The fact that we consider the PC market as a whole group and not a particular brand or a subgroup of PC's, further justifies this conclusion.
Still, with other things being equal, the demand will decrease with increasing price as the Law of Demand suggests. However, most of the time, the percentage change in price will be larger (in absolute value) than that in the demand.
The global PC market is a highly competitive one with everyone trying to supply for the lowest possible price (or suppliers will have to quit the industry in case they cannot supply at the market price).
The supply curve would still follow the Law of Supply (Other things being equal, higher price is incentive for suppliers to supply more) but would be more gradual. In other words change in quantity traded is very sensitive to price changes.
The intersection point of these two curves will determine the equilibrium price. i.e. where supply meets the demand.
2.What trends do you think are occurring in the global market for personal computers? Illustrate these using your model of the market developed above.
As the computer technology becomes cheaper all the time, the PC price is decreasing almost continuously.
This leads to a movement along the demand curve as illustrated in the next page.
Also, we can expect an overall...