The paper “ Correlation between Equilibrium Price and Quantity of Personal Laptops, the Elasticity of Demand and Shift in Consumer Income” is an informative version assignment on marketing. In the world of electronics over time, people realized the immense use of having a personal laptop, and at the same time, technology has improved significantly in the last decade. In fact, technological improvement has surpassed the increase in willingness and ability to purchase a laptop. Given this piece of information, what does your opinion happen to the equilibrium price and quantity in the market for a personal laptop? In the world of electronics over time, people have realized the immense use of having a personal laptop.
Their preferences have changed to adopting personal laptops. This preference is a result of their choices based on the increase of their willingness and ability to purchasing a personal laptop. In the short run, change of preference will cause an outward shift of the demand curve from D to D’ in the market (Rubin & Dnes 2010, P. 450). Holding the supply of personal computers constant in the market, the equilibrium position shifts from E to E’ .
The demand will increase from Q to Q’ , which will lead to a decline in available quantities of personal computers in the market. Shortages will influence the prices to increase from P to P’ . The new equilibrium position in the market for personal laptops will be at E’ , with Q’ and P’ as the new quantity and price respectively in the market. In the long run, however, the manufacturers of laptops will increase their supply in order to maximize their profit since the prices in the market are high (O'Brien 2011, P.
186). The supply curve will shift from S to S’ . At the point of intersection of the new supply curve and demand curve, the new equilibrium position in the market of personal laptops is established. Prices will decline from P to P’ , but demand will increase from Q to Q’ . Consumers will be demanding Q’ quantities at a price p’ at the new equilibrium point in the market. Question TwoIf income elasticity of demand for good X is 0.89, what will happen to the equilibrium price if there is an increase in the income of consumers? Income elasticity of demand is a measure of the response rate of quantity demanded due to changes in consumers’ income (Webster 2003, p.
32). Where income elasticity is below one but greater than zero, the good is normal and is income inelastic. In this case, the income elasticity is 0.8, thus its demand is not very sensitive to changes in income. For a normal good, the increase in quantity demanded leads to a decline in prices of the product at ceteris paribus.
For every $1 increase in the income of the consumer, he will be increasing his demand with 0.8 units. With the increase in demand for good X by the consumer, the price of good X shall decrease. Changes in the income of the consumer lead to a shift in the demand curve from D to D’ . As a result, the price of good X increases from P to P’ . A new equilibrium position is established in the market at point E’ . The prevailing equilibrium price of good X becomes P’ .