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The relative price of personal computers has dropped drastically over time

Marketing Jan 13, 2021

The relative price of personal computers has dropped drastically over time. Would you explain this falling price in terms of demand or supply changes? What factors (at least 4) are likely to have caused the demand or supply shifts that did occur?

Expert Solution

If relative price of personal computers rises, there would be demand change in short run while supply change in long run. Considering the short run case, only demand would change. Factors that would cause demand to rise are:

1) Consumers disposable income rises

2) Fall in price of good causes Substitute effect which raises the demand

3) Lower Prices would lure those customer who had no plan for buying the computer which raises the demand

4) Trend of buying computers would change as people follow what others are buying

5) Consumer expectation towards the product rises whose sales rises abruptly which raises demand

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