Answer to Question #160266 in Microeconomics for liu

Question

  Brand                   2017         2018        2019

1 Lenovo. 28 30 30

2 HP. 13 14 15

3 Dell. 12 13 14

4. Asus. 7 7 8

5 Acer. 6 6 6

6 Others. 34 30 27

1. The above table and figure shows recent market share data for personal computer in Indonesia. Use the above data, relevant online resources and economic reasoning to answer the following questions:

(a) Describe the trend of personal computer (PC) sales by brand in Malaysia over 2017-2019 period (table 1)?

(b) Calculate the concentration ratio of PC industry (table above) for:

(i) the top three firms in the industry.                                                              

(ii) the top four firms in the industry.                                                         

(iii) compute Herfindel-index of top 5 firms in the industry

Answer 1

1. a.

Lenovo computer shows an increase in sales from 2017 to 2018, but the sales become stagnant in 2018 and 2019. HP computers show an increase in sales from 2017 to 2019. Dell computers show an increase in sales from 2017 to 2019. Asus computer sales have been stagnating in 2017 and 2018, but sales increased in 2019. Acer computer shows stagnant sales from 2017 to 2019. Others have been showing a decrease in sales from 2017 to 2019.

b.

(i) Concentration ratio is calculated as;

$CR3=(X1+X2+X3)/T$

Where,

$X$ is the total sales by individual company

$T$ is the total sales for the industry.

Lets now substitute with the values of the top three companies. In this case we will use the late market values which are for 2019.

$\therefore CR3=(Lenovo+HP+Dell)/T$

$CR3=(30+15+14)/T$

$T=30+15+14+8+6+27$

$\therefore T=100$

$=59/100$

$=0.59$

(iii)Concentration ratio is calculated as;

$CR4=(X1+X2+X3+X4)/T$

Where,

$X$ is the total sales by individual company

$T$ is the total sales for the industry.

Lets now substitute with the values of the top three companies. In this case we will use the late market values which are for 2019.

$\therefore CR4=(Lenovo+HP+Dell+Asus)/T$

$CR4=(30+15+14+8)/T$

$T=100$

$CR4=67/100$

$=0.67$

(iii) let first calculate the market share of the top five companies using the recent data which for 2019.

Market share$=\text{individual market value/total market value}*100$

$Lenovo=30/100*100$

$Lenovo=0.3*100$

Lenovo=30%

$HP=15/100*100$

HP=15%

$Dell=14/100*100$

Dell=14%

$Asus=8/100*100$

Asus=8%

$Acer=6/100*100$

Acer=6%

Herfindel-index formula=

$HH1=X$²₁$+X$²₂$+X$²₃$+X$²₄$+X$²₅

Where X represents individual market share.

$\therefore HH1=30^2+15^2+14^2+8^2+6^2$

$HH1=900+225+196+64+36$

$HH1=1421$