1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar
Source link: http://archive.mises.org/4030/supply-demand-and-the-price-of-laptop-computers/

Supply, Demand, and the Price of Laptop Computers

September 1, 2005 by

The poor Associated Press. It attributes the fall in prices to an increase in demand on the part of college students, but that would raise prices (assuming supply relatively constant).

It is competition and increasing efficiency on the supply side that have reduced the price of laptops (VCRs, DVD players, and so on) and thus made laptop purchases attractive to more and more students, not the reverse. This is the market at work to make yesterday’s luxuries available to the masses. (At the end AP does make a brief concession to supply factors, but still makes it clear it doesn’t understand the long-term, free-market process.)

No wonder journalists are such statists. They don’t even understand the basic supply-demand model covered in the first two weeks of ECON 101.

{ 9 comments }

Yancey Ward September 1, 2005 at 4:13 pm

Dale Steinreich,

Though it wouldn’t surprise me to find that the author really doesn’t know that an increase in demand will lead to an increase in price (all else being equal), I don’t know that this article demonstrates it. It could have been that the author was simply pointing out that the increase in usage by college students has caused computer manufacturers to ramp up production even more (they all see a market growing faster than desktops). This might lead to falling prices, I suppose, as long as the supply increases more than the demand. It just seems to me to be a case where the writer really doesn’t know how to write clearly. However, in any case, he would be wrong. Laptops have been falling in price ever since they were first developed, and for the same reasons that desktops have been falling in price.

Roehl Briones September 1, 2005 at 5:07 pm

Alternatively, it could be a combination of two mistakes:

1. Non sequitur fallacy – demand increases, price falls, therefore rising demand must have reduced price!

2. The error of confusing increase in demand with increase in quantity demanded (caused by a fall in the price).

Yancey Ward September 1, 2005 at 8:17 pm

Of course, considering some of the debates I have had the last 2 days, the writer may really think demand is the reason the price fell. I had an otherwise intelligent friend of mine actually make the statement that the “price gouging” was the reason that certain stations in the south have run out of gasoline to sell over the last day. Alas, logic is a lost art.

Dale Steinreich September 1, 2005 at 9:34 pm

Good comments.

With respect to students desiring laptops, in place of “attractive” I should have said “an option.” I am wondering why producers would choose to wait to ramp up production now because of demand, I don’t think it’s plausible.

I see the market as supply increasing and quantity demanded increasing, as alluded to in Mr. Briones’ point 2. Who knows? I could be completely wrong. :)

Francisco Torres September 2, 2005 at 12:17 am

The truth behind the lower laptop prices is not the increased demand, even though there is greater demand for laptops, and producers are responding to this; the real reason is competition.

The number of laptop manufacturers has increased a great deal in these last 3 years, now that there are new manufacturing facilities in China. Previous generic motherboard manufacturers are now jumping into the laptop bandwagon, offering pretty decent products at very good prices. You can find a brand new laptop at Walmart for 550 bucks (!!!) ready to work right out of the box.

So, while there could be reason to believe a rise in demand lowered prices, the truth is thatever increasing competition has driven prices to the ground… and something for which I am very glad!

Dub Zivkovic September 2, 2005 at 6:00 am

I don’t see this as an example of the non sequitur fallacy (or rather, the post hoc fallacy), or of confusing demand and quantity demanded.

Of course competition is behind the fall in prices of laptops, but why is there competition? Why has the number of manufacturers increased and why are there new manufacturing facilities in China?

The author was guilty of a far simpler sort of economic illiteracy than the earlier comments have suggested. He/she simply confused human desire with “demand” (in the formal economic sense).

Students knew how useful laptops could be; they desired them, but couldn’t afford them. Producers did what successful producers do by anticipating demand, which led to competition and innovation, and the supply of laptops at a price at which students were willing and able to buy them.

Producers’ predictions are often wrong (they build it and people don’t come eg. the Internet Fridge), but one thing’s for sure – the cart of consumption follows the horse of production.

Erwin Young October 27, 2005 at 9:25 pm

Laptops are the new breed of computers in the market. Over the years, the technological advancements have pushed computers to its peak. Laptops are ideal computers because of their portability and reliability. Plus, laptops has great features that convey the personality of the new generation. As one of the best innovations, laptops continue to defy the limits of information technology.

Kristina May 24, 2010 at 4:34 am

Its good that the prices of Laptops are decreasing. Laptop is no more a luxury in this fast world. Having a Laptop, you are taking the world in your pocket. It is really good that due to decrease in prices, it is affordable to many.

muhammad husain May 27, 2011 at 12:16 am

It happened very well that laptops has decreased in their prices, and every one can afford it. and by my point of veiw desktop computers will vinish very soon.

Comments on this entry are closed.

Previous post:

Next post: