Question

Consider the demand for computers. For each of the following, state the effect on demand: An...

Consider the demand for computers. For each of the following, state the effect on demand:

An increase in consumer incomes

An increase in the price of computers

A decrease in the price of Internet service providers

A decrease in the price of semiconductors

It is October, and consumers expect that computers will go on sale just before Christmas.

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Answer #1

(A) Demand increases, considering computer as normal good, as income rises, the demand for the product rises.

(B) Demand decreases, by law of demand as price of commodity rises its demand falls and vice versa.

(C) Demand increases, ISP and computer are complementary goods, hence as ISP price decreases the demand for computer rises.

(D) Demand increases, or remains unchanged , if we consider semi conductor as a complement to computer because computer also requires circuits and wiring then demand will increase, but if we consider no relation between semi conductor and computer then there will be no change in demand.

(E) Demand decreases, as people are speculating that price of computer will be low before Christmas, they wont buy computers in October at high price because they know that it will fall before Christmas.

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