Tablet Computers

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2011
Lashgari Persia (student)
EC180
12/12/2011
Tablet Computers

Contents
Page No.
* Introduction to the Report 3
* Factors that Affect the Demand for Tablet Computers 3/4 * Measuring and Determining the Elasticity of Demand 5/6 * Pricing Discrimination and its Limitations 7
* Associated Costs (Fixed & Variable Costs) with Providing Tablet Computers 8 * The extent to which there are Scale Economies and How they Occur 9 * Minimum Efficient Scale & Diseconomies of Scale 10 * Structure of the Tablet Computer Market 11

* Barriers of Entry to the Market 12
* Conclusion 12
* Bibliography 13
Introduction
In this report I will be analysing the market for tablet computers to see whether or not there is a gap in the market to launch a new tablet computer. Methodology
I will be critically reviewing the computer tablet market as a whole identifying if there is a Demand for this product and what may affect the demand. I will evaluate the costs associated with manufacturing and selling this product and look into the structure of the market to see if there are any barriers that will prevent us from entering.

Factors that Affect the Demand for Tablet Computers
Law of Demand: (“all else being equal or other things the same”) Ceteris Paribus As price increases we demand less, as price decreases we demand more. Without demand there is no business. Demand is affected by consumer’s tastes, the number and price of substitute goods, the number and price of complementary goods, income, and expectations of future price changes. Income is a major fact in consumer behaviour as consumers seek to maximise utility (satisfaction) from their limited income (how much disposable income they have). This graph shows the relationship between the price of a good and the quantity of the good demanded over a specific time period. P1 shows the product being sold at a higher price and as a result of this less is being demanded Q1. There is then a downwards movement along the curve to P2 showing the product is being sold at a lower price showing that more is being demanded Q2. Price

Demand Curve
P1

P2

Q1 Q2 Quantity

Price of Substitutes, Sloman, et al (2010) describes substitutes as they are goods which are considered by consumers to be alternatives to each other. As the price of one goes up, the demand for the other rises Price of Complimentary Goods, these goods are consumed together, as the price of one goes up, the demand for both goods will fall. E.g. software - tablets are known to have various applications which are downloaded through specific software which enables the user to carry out a set of tasks. These applications are chargeable; if the price is too expensive the demand for tablet computers will go down. Also if the software is not as high quality as the others then consumers may look for alternatives. Price of substitutes and complimentary goods can cause a shift in the demand curve to the left. This will occur if there is a decrease in the price of a substitute or increase in price of the complimentary good. This is shown in the graph below:

Shift in the Demand Curve to the Left
Price

P1

P2

P3 D2 D
Quantity
Q1 Q2 Q3

Measuring and Determining Price & Income Elasticity of Demand As price falls the quantity demanded increases and as price increases quantity demanded falls, to measure the extent of this we use Elasticity of Demand as this measures the responsiveness of quantity demanded to changes in price: PED=% change in quantity demanded

% change in price
Elastic- (>1) a change in price causes a proportionately larger change in the quantity demanded. The price elasticity of demand will be greater than 1. Price Elasticity of Demand
I am unable to calculate...
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