Assignment Economics

Question 1 - Before introducing its inkjet printers, did HP have to estimate the demand
curve for them? Why or why not?

Answer-Yes , HP have to estimate demand curve for them , to become aware that whether their
product will survive or not.
Further, the thermal inkjet technology was invented by HP and they were the first company ever
to manufacture a low cost inkjet printer. HP launched its first low-cost INKJET PRINTER in the
year 1984 and before the launch of INKJET PRINTER, EPSON was the market leader for DOT-
MATRIX PRINTERS and public also didn’t have any idea of the INKJET PRINTERS.
The most important factor considered for estimating demand curve are:
1 - Poor print quality and color of Epson’s dot matrix printers
2 - No competition for DOT-MATRIX PRINTERS
The two different ways by which HP must have depicted the demand and consumer behaviors
are as mentioned below-
1- HP can conduct door-to-door survey and discuss about new technologies related to printer,
and also, by taking feedback and review of DOT MATRIX PRINTERS.
2- HP can learn from current market trend, technologies and inclination of public, and must have
known about the flaws in EPSON’s DOT-MATRIX PRINTERS i.e. Poor print quality and color.
Question 2 - When studying Epson before going after the Japanese dominated dot-matrix
market, did HP try to determine which factors would have an important influence on the
demand curve for its product? If so, what factors seemed to be particularly important?
Answer-
According to the Case Study, HP considered the factors which would have an important
influence on the demand curve for its product.
In the year 1984 HP has first invented its Thermal Inkjet Printer but it was not of that quality to
meet customer’s expectation. But HP continued to improve and produce its low –cost Inkjet
Printers.
HP studied the market and how EPSON has captured the market by launching reliable low cost
products and it responded accordingly.
HP checked the public demands and realized that public wanted a less sophisticated printer with
less price as there were flaws in EPSON’S DOT-MATRIX PRINTER.
It is also to state that there was no one else except HP and EPSON in the market so, HP had an
advantage, HP’s engineers used this advantage and created a completely new Inkjet Color Printer
which was easy to operate and suited the needs of mass market.
In the year 1984 and 1988, HP launched its ‘low-cost INKJET PRINTER’ and ‘DESKJET –
THE PLAIN PAPER PRINTER’.
In 1990, HP developed a color printer.
However, HP compared their both INKJET, LASERJET PRINTERS and tried selling their
INKJET PRINTER marketing it at a less-cost with good printing qualities. Later, HP realized to
position their INKJET PRINTER against Japanese dominated EPSON’S DOT-MATRIX
PRINTER.
As per the Case Study, HP did the following strategies to get a hold of the market –
1- HP demanded stores to put their INKJET PRINTERS alongside EPSON’S.
2- HP filed a blizzard of patents to protect their design and frustrate rivals, and HP also kept
making continual improvements in manufacturing new printers with variations and they also
solved issues related to INKJET PRINTERS.
3- HP tripled its warranty period to 3 years and redesigned its printers .
Question 3 - HP cut the price of its black-and-white printer from $995 to $365. If the
quantity of such printers that it sold per year increased ten-fold, does this mean that the
(arc) price elasticity of demand for this product was about 1.8? Why or why not?
Given:
Price 1 = $ 995 ….(1)
Price 2 =$ 365 ….(2)
Q2(Quantity 2)= 10* (Quantity1) ….(3)
Solution:
We know that
(arc) price elasticity of demand=[(Quanity1-Quantity2) / Midpoint of both Quantity]
/ [(Price1-Price2)/Midpoint of both price]

 so, after putting the values from equation 1,2 and 3 in the above formula ,we will get
 Arc price elasticity of Demand = [ (Q1-10 *Q1) / (Q1+10*Q1)/2] / [(995-365) /

(995+365)/2]
= [-18 / 11] / [ 1260 / 1360]
=1.76 ~ 1.8
Yes , Arc price Elasticity of Demand is 1.8 as per the calculation .
Q4- Can the data in the graph on Page 68 be used to determine the trend in the Hewlett’s
Packard’s printer market share? What are the Limitations of these data for such
purposes?
Answer- Yes, the data in the graph on page 68 can used to determine the trend in Hewlett’s
Packard printer market share because it basically highlights HP US based printers market graph
for growth in demand and sales of printer’s year wise. HP did not even start pc printer making
business till 1984 after that they planned to start including printer in their product category in
addition to exiting. They expected to have about $8 billion market share in printer making
business by launching new product category of printer in 1985.
The graph available on Page No. 68 of Case Study shows that market share grew drastically from
1984 to 1989 due to the new launches of HP products and consistent improvement by using new
technology.
From year 1989 to 1992, growth was stagnant (constant graph)
Between year 1992 to 1993, HP again came in the market and grew as per the graph.
Limitations of the data for that purpose as follows: -
 HP decided heavily financial investment in laboratories to make products in large quantity.

 HP also adopted of mass marketing with penetration marketing strategy by launching of new
product at extremely low cost.
 HP also launched rapid fire of product variations to beat the market competitors.
 To get hold off niche market, HP also adopted fixed high cost for products to get high profits
but due to that they lost their calculator business.
 HP also discovered the thermal inkjet technology in product variations.
 HP inkjet printer was cheaper, and it was easier adaptable for color printing as well.
 HP had also introduced a successful line of expensive laser printers for corporate customers.
 HP also understood the need of balancing entrepreneur and central leverage globally.
 HP also enhanced its technological advancement to compete printer market competitors.
Q5- If you were hired by the Hewlett’s Packard to forecast how may inkjet printers it
would sell next year, how would you go about doing it? What would you need? What
techniques would you use? How accurate you think your forecast would be?
Answer- If I was hired by Hewlett’s Packard to forecast inkjet printers’ sales next year, then it
would be
more than 10 million of units.
To reach the projected target, we will basically go with depth analysis of demand forecasting
through various techniques to evaluate approximation of data pertaining to product demand in
coming year. The techniques through forecasting data will be evaluated as follows: -
 Market factor analysis.
 Econometric model building.
 Historical data analysis.
 Statistical methods.
 Expert opinion.
 Sales force opinion.
 Test marketing result.
 Consumer buying plan.
We will also go with some other factors mentioned below to forecast of printer sales for next
year: -
 Through inclusion of technological product as TV-top printers for interacting TV services.
 We will also continue with the improvements in our product category to make it more
reliable, convenient to use and make it available for consumers.
 HP had a lock on many important patents.
 HP learn that “you can tweak you’re not so latest thing, get the latest thing” to get the jump
over competitors in the now booming color printer market.
 Positioning the inkjet as low-cost alternative to HP’s fancy laser printers.
 We shall adopt vital strategy, cut the prices of the products before competitors enter the
market.
The data which should we need to forecast as follows: -
 Market size value.
 Revenue forecast in coming year.
 Business growth rate chart.
 Report coverage.
 Regional and globally scope.
 Pricing and purchasing options.
 Depth analysis of market growth chart and printer market chart is required to enter the
market.
 Product usages of segmentation and their sales and market growth in past.
 HP also have economies of scale, which allowed it to reduce its prices as compared to the
competitors.
 To make printer available in every home.
At last, we think that if we approx. 95 % accuracy regarding our expected forecast of sales in
respect
of HP inkjet printer in next year, it would be more than 10 million units through various analysis
techniques of sales, demand and price.

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Question 1 - Before introducing its inkjet printers, did HP have to estimate the demand

curve for them? Why or why not?

/ [(Price1-Price2)/Midpoint of both price]

 Arc price elasticity of Demand = [ (Q1-10 Q1) / (Q1+10Q1)/2] / [(995-365) /

= [-18 / 11] / [ 1260 / 1360]

Limitations of the data for that purpose as follows: -

 HP decided heavily financial investment in laboratories to make products in large quantity.

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