Examine The Factors That Determine The Price Of Computers In A Free Market



Examine The Factors That Determine The Price Of Computers In A Free Market

Desktop computer rental prices are usually cheaper than laptop computer rental prices. The pricing, of course, are based according to the original price value of the equipment when it is bought brand new; laptops are really more expensive than desktop units. (Pradip 2007)

The primary factors affecting U.S. trade and shipments of computer equipment were the extraordinary growth in U.S. and global demand for these products and a continuing trend toward the globalization of production and component sourcing. Certain general economic and industry trends contributed to the growth in demand including the development of increasingly productive computer applications and software for home and business use, intense price competition, technological advances, regional macroeconomic events, and duty reduction agreements. Globalization proceeded throughout the decade as computer equipment industries continued to develop outside of the United States, principally in East Asia, and U.S. firms established or expanded offshore manufacturing operations.

Fierce price competition among the leading computer equipment manufacturers also contributed to worldwide consumption. As prices declined and computers became more affordable, they were increasingly adopted by both corporate and home users. As discussed earlier, the declines in selling prices for computers were largely made possible by the technological advances that led to falling production costs for computer parts and subassemblies, particularly semiconductors. Advances in computer technology also led to an upgrade cycle and replacement market in which consumers often replaced existing computer equipment every few years with newer products in order to take advantage of improvements in software applications. In turn, the availability of newer, more powerful machines drove down the price of older models, further fuelling demand and feeding the cycle by expanding the number of consumers that could afford them. (Pradip 2007)

During 1991-2000, the globalization of computer equipment manufacturing influenced the growth of U.S. trade as well as the mix of U.S. trade partners. In a climate of intense price competition, U.S. firms established or expanded manufacturing operations outside the United States and increased their sourcing of parts from foreign suppliers in efforts to increase global competitiveness by lowering production costs and improving proximity to markets. In addition, many U.S.-headquartered computer equipment producers, such as IBM, Compaq Computer, and Hewlett-Packard, established relationships with contract manufacturers that often produced complete computer systems on their behalf, typically in countries such as China, Malaysia, and Mexico, where they are near centres of component manufacturing and labour costs are a fraction of those in the United States. As a result, U.S.-headquartered firms have increasingly supplied the U.S. market with parts or complete systems manufactured abroad. During the period, EU and Japanese manufacturers also shifted portions of their production and component sourcing abroad, principally to East Asia. In addition, indigenous computer equipment industries in this region have continued to develop. Because of these trends, U.S. imports and the import share of U.S. consumption increased, and the relative importance of import suppliers ...