F.4C
Rosemarie Chiu (7)
Edith Hui (13)
Source: South China Morning Post (Saturday, Dec 06, 2008)
Gadget sale rings up
HK$50m on first day
Peter So, Dec 06, 2008
The recession may be forcing people to tighten their belts, but who can resist a 4GB memory card for HK$49 or the latest laser printer for half price?
The answer is: no one. At least that seemed to be the case at an outdoor computer festival yesterday. Thousands flocked the narrow streets of Sham Shui Po to buy laptops, monitors, printers and cameras at what exhibitors touted as "tsunami prices".
The organisers - Sham Shui Po District Council and the Chamber of Hong Kong
Computer Industry - said that turnout was larger than expected on the first day, with sales topping HK$50 million.
Police had to implement crowd management measures as more than 5,000 people packed the festival in the first two hours.
The annual festival, which runs until Monday, has attracted more than 80 exhibitors. The organisers expect total turnout to exceed 400,000, with shoppers spending more than
HK$180 million.
Eddy Wong, manager of a shop selling display monitors, said most products were selling at cost price, or 40 per cent off regular prices. He has more than a thousand monitors in stock. Some had sold out in the first few hours and he said: "I am confident that all the stock will be sold."
Computer salesman Calvin Tse said his shop sold about 10 laptops during the morning.
He said most people had stopped spending in recent months. "Business had been so quiet in the past few months, down about 40 per cent." He predicted the outlook would be grim after the festival as "we don't know when the economic downturn will be over".
Vincent Leung, who went shopping in his lunch break, said he had been waiting for the festival to buy a monitor and a television set-top box for a total of HK$3,000, saving himself about HK$600.
Housewife Portia Li said the sale had encouraged her to spend. "I have bought two extra display monitors because they are very cheap."
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The Annual Shum Shui Po Computer Festival
Describing the issue
The sale of computers had been very poor for the past few months because of the current recession. Yet, crowds of people scrambled for heavily discounted computer and electronic products at a computer festival, which was initialised by a motherboard manufacturer.
Diagram
Figure 1 – Demand and Supply of Advanced Computers
P
S1
S2
Excess supply
(Surplus)
P1
P3
P4/ Pe
D1
D2
Q
Q2 Q3 Q1 Q4
(Qe)
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The Annual Shum Shui Po Computer Festival
Explanation of the issue
I.
Change in Demand
Recent advertisements about the latest electronic products brought changes to people's taste and raise the demand for computers. This increase is however offset by the positive income effect over superior goods. Advanced computers are normal goods or superior goods because people demand for more when income increases. The demand for advanced computers therefore decreases in the current recession. The overall net decrease in demand is reflected by a leftward shift of the demand curve (D1

D2) in figure 1.
II.
Change in Equilibrium after Change in Demand
After the decrease in demand, but before the adjustment in price (remaining at P1) and increase in supply, there was an excess supply, being the difference between Q1 and Q2 in figure 1. The quantity transacted fell (Q1

Q2). The revenue of suppliers also fell
{(P1

Q1)

(P1

Q2)}. After the price fell to P3, the equilibrium quantity increases to
Q3. Yet the total revenue (P3

Q3) is still less than that before the crisis (P1

Q1). So, the businessmen said that the “business was down for the past few months.”
III.
Change in Supply
The supply of computers and electronic products in Hong Kong has recently increased due to the following three factors. Firstly, the PRC computer manufacturers, whose orders have been cancelled by many overseas buyers in the financial tsunami, relocated their unsold stock to the HK market for clearance. Secondly, since the industry predicted that “the outlook would be grim after the festival”, they would prefer to sell their stock as soon as possible to avoid unexpected price cut in the future, thus raising their current supply. Thirdly, as these sellers’ objectives are to maximize sales to clear the unsold stock and to improve their cash level, they prefer to increase their supply even the goods will be sold at a lower selling price. The ultimate increase is shown by a rightward shift of the supply curve (S1

S2) in figure 1.
IV.
Quantity Transacted Increase
These above changes in demand and supply together drive the price downwards (P3

P4). As price decreases, according to the Law of Demand, the quantity demanded increases along the D2 demand curve (Q3

Q4), ceteris paribus. As the decrease in demand is smaller than the increase in supply, the quantity transacted increase (Q1

Q4) in figure 1. The total revenue of the suppliers is now shown by (P4

Q4).
V.
Other Observations
A lot of customers queued up to visit the Festival. The opportunity costs of these customers include their opportunity cost of time to queue and their opportunity cost of money spend in buying the products. The opportunity cost is the best alternative forgone in using the resources (time and money) the individual has, which is likely to be different for each individual depending on her circumstances and choice.
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The Annual Shum Shui Po Computer Festival
Computers are economic goods. They involve positive production cost. People prefer to have more computers and its quantity available is not enough to satisfy all human wants.
HK practices market economy, where people are free to make production and consumption decisions and market prices serve as signals in deciding what goods to produce and in what quantity. Thus, peoples’ ability to pay determines the quantity of goods they can get at the Festival.
Computers can be a consumer good and at the same time, a capital good. Computers are consumer goods if people use it to satisfy their wants directly (e.g. play computer games with it). It will be a capital good if people use it to derive income (e.g. teachers use it for teaching).
Computers and their complementary goods (e.g. USBs, printers and monitors) are in complementary demand. A decrease in price of computers leads to an
Figure 2 –Demand for computer complemntary goods increases after decrease in price of computers increase in the demand for its complementary goods (a rightward shift of the demand curve D1

D2 in figure 2.)
The increase in quantity transacted of these products in the Festival can be explained by both, an increase in their demand due to a decrease in the price of computers; and a decrease in their prices, which can be explained by the law of demand.
P
D1
D2
Q
Computers sold in this Festival and those in Broadway and Fortress are substitutes.
As the price of computers in the sale is lower, people buys computers in the sale rather than those in those shops. Hence the demand for computers in those shops decreases, ceteris paribus. This is represented by a leftward shift of the demand curve (D1

D2), a reduction in price (P1

P2) and in quantity demanded
(Q1

Q2) in figure 3.
The festival was initiated by a computer motherboards manufacturer, Mr. T.K.
Leung. Motherboards are inputs of computer. Mother-boards and computers are in derived demand. An increase in quantity demanded for computers will lead to an increase in demand for motherboards, ceteris paribus. Thipaps is represented by a rightward shift of the demand curve (D1

D2), an increase in price (P1

P2) and in quantity demanded
(Q1

Q2) in figure 4. This explains why
Mr Leung initialized the organization of
Figure 3 – Demand for Substitutes decreases after decrease in price of computers
P
P1
P2
Q2 Q1
S
D2
D1
Figure 4 – Demand for computer motherboards increases after decrease in price of computers
P
P2
P1
D1
D2
Q1 Q2
S
Q
Q
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the Festival.
The Annual Shum Shui Po Computer Festival
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