Question

Choose a company of laptops of your own choice and explain the following characteristics of the chosen product.

1) Substitutes and complements goods of the product and their implication.

2) Major current and past reason for variation in demand and supply.

Answer 1

1)

Let say my company is Dell. There are many substitutes for Dell which are available in the market. For example, HP, Acer, Lenovo etc. The implication of availability of substitutes is closely related to demand conditions.

If there are more substitutes available in the market for Dell, then a price increase in a Dell Laptop will have a serious consequences on its demand. People will find Dell costly and shift their purchases to other laptop companies. Eventually, the revenue for Dell will decline.

Complement Goods for Dell laptops are charger, Hard drives, portable mouse etc. Any increase in the price of these goods, will decrease the demand for Dell laptops as both goods are purchased in combination of one or another.

2)

One of the major reasons for variation in demand and supply is technological change. Technology advancement in a Dell Company will boost its supply in the market and make the laptops cheaper.

Another reason could fall in the price of the inputs that are used in production of Dell Laptops like motherboard, RAM etc. Such price drop would lead to increase in the supply of laptops.