Supply and Demand for computers, software and typewriters in the 1990s

Supply and Demand for computers, software and typewriters in the 1990s

The demand for computers in the 1990s

D₁ D₂ Supply curve

Demand

$₂

$₁

Q₁ Q₂

Quantity Supplied

In the early part of the 1990s, demand for computers was low because of the prohibitive prices that were being charged by the manufacturers. This is because at the time, there was a monopoly by IBM who had dominated the market. As a result of this, they could charge high prices without having any concern for competition. This kept the demand for these computers at a lower level thus translating to a low supply. As time progressed, other players began making their entry into the market, most notably apple computers who gave the Personal Computer a run for its money. As a result of this, the prices of computers in the market reduced for competitive purposes. This then had the effect of increasing demand for the computers. As a result, the equilibrium price as well as equilibrium quantity required in the market also increased having the effect of moving the quantity demanded from Q1 to Q2. The arrows on the diagram show an upward shift in demand. A reduction in the cost of software also had an effect of increasing this demand(Singh and Gupta, 1999).

Demand for Software in the 1990s

Demand D₂Supply Curve

D₁

$₂

$₁

Quantity Supplied Q₁ Q₂

Initially the demand for software was very low because it was expensive to purchase the same. It was actually more expensive to purchase software than to purchase the computers where they were to be installed. As a result of this, the demand was very low. The number of providers of software in the market was also low due to a low demand for computers at the time. When this business model was realized to be impractical, the prices of software plummeted and this ultimately increased demand. The softwares were now being purchased on a much larger scale by the manufacturers of computers, end users and other parties that could now easily afford them. When this happened, there was an increase in demand and this pushed the equilibrium quantity supplied to the market. The effect of this was to open up the market to new producers of software and further bring down the prices thus increase demand further (Singh and Gupta, 1999).
Demand for typewriters in the 1990s

Price D₁

D₂

Supply Curve

$₁

$₂

Q₂ Q₁

The increasing availability of personal computers to consumers and the ability of users to process word documents in the devices served to make typewriters appear backward and unattractive. The only functionality that typewriters had was their ability to print as one typed. However, the word document processors that came with personal computers provided users with more functionality such asmore formatting options for the users and also the ability to save documents for later use. As a result of this and the reduction in prices of computers, fewer consumers were purchasing typewriters. This drop in their demand (as seen from $₁ to $₂) continued since more and more people favoured personal computers and this meant that the quantity of typewriters making their way into the market also reduced as seen in the demand and supply curve displayed above.The drop in the prices of software could also have contributed since they are a complimentary good for computers and thus made having a computer more affordable (Gordon, 2000; Pearson, 1997).

The above analysis and illustrations are clear evidence that as far as technological commodities go, demand and price of both related and unrelated commodities have the potential to determine the fortunes of another product on offer in the market.

References

Gordon, R. J. 2000. Does the” New Economy” Measure up to the Great Inventions of the Past?(No. w7833).National Bureau of Economic Research.

Pearson, J. F. 1997. Typewriter To Computer-Fifty Years Of The New Zealand Plant Protection Society’s Publications. In Proc. 50th NZ Plant Protection Conf (Vol. 357, p. 363).Culler, D. E., Singh, J. P., & Gupta, A. 1999.Parallel computer architecture: a hardware/software approach. Morgan Kaufmann Pub.