“In the past 15 years, technological advancements have led to an increase in the production of computers. This causes the price of computers to fall. As a result, demand for computers have risen since more people can now afford to buy computers”. Is this analysis true or false
“In the past 15 years, technological advancements have led to an increase in the production of computers. This causes the price of computers to fall. As a result, demand for computers have risen since more people can now afford to buy computers”. Is this analysis true or false? Explain.
Meaning of Demand:
Demand for a commodity refers to as the desire to buy a commodity-backed with sufficient purchasing power and willingness to spend, thus demand refers to different possible quantities to be purchased at different possible prices of the commodity. At the higher price, the quantity demanded will be low and at a lower price the quantity demanded will be less.
Further, since the quantity purchased will depend upon the price of the commodity, therefore it follows that “demand means at a specific price”. It can also be stated as ‘demand per unit of time’, as per year, per month, and per day.
Some Factors That Will Determine the Demand for Computers:
- The price of the product (computers):
Price is always the basic consideration in determining the demand for a commodity (computers). Normally, a larger quantity is demanded at a lower price, thus if the price of the commodity or product falls, the consumer might or will buy the product if he/she has initially denied the product due to its high price.
- The state of Technology:
Technology plays a crucial role in determining the demand for a product. As time goes on the state of technology improves with its functioning process, thus the new technology arises it will reduce the cost of production for computers and thus will decrease the price of computers in the market.
- Income and Wealth:
Income is an equally important factor in determining the demand for commodities. The rise in the income of consumers tends to rise in the increase in purchasing power. So if initially due to a rise in technology factors results in a fall in the price of computers and an increase in income for consumers, then the more commodity of computers will be demanded.
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