Substitutes and complementary Products for Dell Laptop Computer. reasons for demand and supply changes from the past few years. effect of COVID-19 on demand and supply of laptop computers

1. Assignment No 2
Managerial Economics
Company: Dell
Product: Laptop Computer
Muhammad Usama Khan(L1S20MBAM0002)
Muhammad HassaanRasool(L1S20MBAM0039)
Syed Kashif Ul Hassan(L1S20MBAM0074)
Abdul Wahab(L1S20MBAM0013)

2. Q#1 Substitutes and complement goods of the products and their
implications.
Substitute Products Complementary Products
HP Laptop Computer Electricity
Acer Laptop Computer Internet
Samsung Laptop Computer Windows & Linux OS
Apple iPad Ms Office
Apple Mac Book Laptop Bag
AMD Desktop Computer 3rd Party Applications
Why they are Substitute products and their implications?
HP, Acer and Samsung Laptop Computers.
These three companies’ laptop computers are directly competing with dell laptop computers.
The cross-price elasticity between dell and HP is very high, so, a little price increase in dell
laptop can cause a huge customer shift towards HP, and vice versa. Same in the case of the
other two companies, because all of these four companies are offering almost similar
products, having similar features and similar OS on almost similar prices. The brand image of
these four companies is almost the same. That's why the cross-price elasticity between dell
and these three companies is so high and these three products are strong substitutes for a dell
laptop.
Apple iPad Pro.
If we can go a few years back, we will observe apple’s iPad was not a competitor of dell’s
laptop computer. In November 2019, Apple launched its new iPad Pro which so powerful to
compete with dell laptops. This iPad Pro also supports apple keyboard and mouse. Although
the cross-price elasticity of these two products is not so high, as these two products are not
directly competing in the market, the reason is pretty obvious that dell laptops are running on
Windows operating systems, where apple iPad is running on Ipad OS. Apple Ipad is a weaker
substitute. Then it’ll not make a huge impact on dell laptop’s demand when we change the
prices.
Apple Mac Book.
Apple mac book is competing with dell laptops for a very long time. Apple mac book is a
direct substitute for dell laptops because all the features which are provided by these two
products are almost similar and both products are designed for normal usage. The cross-price
elasticity of these two products is less than one. The reason which will come up after
investigation, apple product comes under the umbrella of premium category. The prices are
too high and almost double from dell laptop, because Apple is charging for its brand image.
Thus, the Apple mac book is a weak substitute. Apple mac book will not affect drastically on
dell laptop’s demand for changing the price.

3. AMD Desktop Computer.
AMD desktop computer is a substitute of dell laptop computer. The reason behind
considering desktop computers a substitute of a laptop computer is that, desktop computer
posses every feature which laptop provides, however, a desktop computer is way more
powerful than a laptop computer and can be used for normal use and as well as heavy usage,
such as games and developing software. A desktop computer is a perfect and strong substitute
for a laptop computer in offices or any workplace, because it is less expensive and have a
lower maintenance cost. The desktop computer is strong substitute for dell laptop computers
in some situations and weaker in other situations, but still, it is a substitute. This substitute
can affect the demand for laptop computers on changing prices.
Why they are Complementary products and their implications?
Electricity.
Every electronic device needs some energy to operate and electricity is energy, which is used
in different forms in electronic devices. Without electricity, we cant operate our electronic
device. The areas, which don't have an electricity facility, there is no concept of electronic
devices there. The computer is also an electronic device and can’t be operated without
electricity. Electricity is a very strong complement to laptop computers. We can consider
laptop and electricity as important as human and oxygen.
Internet.
A few years back, when we write about the compliments of a laptop, the internet was weaker
and even was not a compliment of a laptop. But now in this modern era of digitalization, it'll
not wrong to consider the internet as a strong complement, even as strong as electricity. A
laptop can’t be used to its maximum output without the internet. Mostly laptop is used by
employees, teacher, and students, and the internet is now compulsory for them. When there is
the availability of the internet and decrease prices then it increases the demand for laptop
computers.
Windows & Linux OS.
Windows and Linux OS are very much important compliments for a laptop. Because without
any OS, a laptop cant be used. It is true if we say, it is as strong as electricity. Mostly OS is
prepared by Microsoft and other few companies, the manufacturer not develop an OS on its
own, they purchase from the second party. Most laptops come with the pre-install OS.
Windows is the most popular OS for computer, whether desktop or laptop. We can consider
OS as a strong complement for laptop computers. When windows prices will decrease, then
it'll uplift the demand for laptop in windows users. Many companies offer bundle packages to
buy these two products together, at less price when buying separately.

4. MS office.
MS office is used with windows laptops. It is also a strong complement for users, such as
employees, teachers, and students. Almost 70% of laptop users use MS office, other 30% use
a laptop for entertainment purposes. Now many companies offer a bundle package, having a
laptop and MS office, at less price when bought separately. So we can say that MS office is a
strong compliment.
Laptop Bag.
A laptop bag is also a complementary product because it is used for safely carrying a laptop
from one place to another. Companies offer discounts on buying these products together. So
the laptop bag is also a strong complement of laptops. Dell manufactures its own laptop bags
to sell it to their customers on a laptop purchase. Most companies offer a 50% discount on
buying a laptop bag with a laptop.
3rd party applications.
3rd party applications are also complement products for laptop. Strongness and weakness can
depend on the nature of the product. for example, antivirus is a 3rd party application and a
stronger complement for any type of user. But when we talk about adobe photoshop, it is also
a 3rd party application but a weaker compliment for employees, teachers, and students, but a
stronger compliment for a photographer. Chrome is a 3rd party application but a strong
compliment. So it depends on the application itself and user how strong compliment a 3rd
party application is.
Q#2. Major current and past reasons for variation in demand and supply.
Since technology took a turn, computers had made it more easy accessibility for people past
10 years. Today an average man spends more than two to three hours on a computer. The
affordable price of laptops had made it popular day by day, this is because of the increasing
demand for computers in the market. From the past 10 years the computer industry’s demand
got boosted drastically. There are many reasons for this drastic change, some of these are
discussed below.
1. The first and the most important reason, due to which laptop industry got expended, is
digitalization. From the past 7 to 8 years, Pakistan is moving towards digitalization in
almost every field of life from govt offices to students, and from multinational
companies to local businesses, all are moving towards an efficient and effective system.
This drastic change also affects the laptop industry and demand and supply for this is
increasing drastically. Maple leaf cement, which is a private limited company, shifts
their operations from manual to ERP software in 2016, and buy laptops of millions of
rupees from dell in 2016. This is just an example of a single private firm, even govt
institutions are shifting their operations on computers to do efficient work. This
digitalization Strom also effects universities student and now laptop is fall in their
needs. Even local businesses are also hit by this storm and they also shifted to

5. digitizations. the demand for a laptop at its peak so does the supply. Digitalization
makes a huge impact on laptop demand and supply. The demand for laptops takes a
huge turn upwards and the market expanded. This marker expansion attracts many other
companies to enter in market, like Huawei. And all competitors are trying to capture the
market share as much as it can. But the key players are still at the top, DELL and HP.
2. Second reason is the availability of the internet. Nowadays, the internet is considered as
a perfect compliment for laptop computer. In the past five years, the internet is almost
available in every city of Pakistan. Internet prices are also decreases, which also affect
the demand and supply of the computer. The Internet is as important to laptop as
electricity. Internet availability boosts the demand for laptops and mobile phones. With
the launch of 3g and 4g in Pakistan, it makes computer and mobile phones most selling
products.
3. Third most important reason for the increase in demand is a decrease in the price of
digital products. So lots of companies now join the industry. that's why the prices of
laptops are decreased, due to a decline in the price of components used in
manufacturing laptops. Now a person having lower buying power can also afford to buy
a laptop because it is inexpensive. with lower prices of electronic devices now even the
middle and lower-middle-class can also enjoy the use of these devices. Thus, the
laptop’s market got expended because a new segment of customers created.
4. Other reason for increase in demand for the laptop industry is the increase in the buying
power of Pakistani customers and the increase in population. In these past few years,
there is an increase in the buying power of customers in Pakistan. The people who had
very low buying power, now their power buying is increased and they manage to jump
into the middle-class category. This shows us the market expansion from the past few
years.
5. 2018 budget was a turning point for the computer industry in Pakistan, where govt
removes the sales tax on the import of 21 types of computer parts. This decision bost
the local manufacturers to provide the laptop to customers at lower prices. After 2018
the laptop prices fall down and a huge market was created.
6. In the budget 2018, there was also tax exemption on the import of laptops, the Pakistani
market was flooded with imported computers from china. This also helps people to buy
laptops. But this tax exemption only lasted less than a year.
Effect COVID-19 on Laptop industry.
In the early months of COVID-19, the laptop industry supply declines drastically because of
strict lockdown in china. China is considered as hub for electronic industry. The electronic
industry faces declines in the first 3 months of 2020, so does the laptop industry. In the early
months, due to restrictions and stricted lockdown, the supply of laptops around the world was
stoped. But the world starts healing from a deadly virus and china fully controlled the virus,
then supply started and after that the senior for this industry was totally changed. The effect
of this pandemic on the laptop industry after the month of march is somehow positive. In
Pakistan and all over the world the people are trapped in their houses. Firm, education
institutions, and govt institutions are working from home. So the demand for laptops at its

6. peak. There is also a category of people who are buying laptops for entertainment purposes to
kill time at home. There is a city in Punjab Pakistan, name Mianwali, the estimated
population of Mianwali city is around 1 lakh. Local PTCL official said, we have install 350+
internet connection in the city in these two months, this amount is so huge, when compare it
to the normal pattern, which is not more than 30 connection per month. The internet is the
perfect substitute for laptop and this shows the demand for laptops also increases drastically.
Many firms provide their employees with laptops to work from home. University students
also requires to have laptops to attend virtual classes. The demand for laptops will be at its
peak in the last few months of 2020.