Viking Inter Works is one of many manufacturers that supplies memory products to original equipment manufacturers (OEMs) of desktop systems. The CEO recently read an article in a trade publication that reported the projected demand for desktop systems to be Qd desktop = 1,600 - 2Pdesktop + .6M (in mil-lions of units), where Pdesktop is the price of a desktop system and M is consumer income. The same article reported that the incomes of the desktop systems’ primary consumer demographic would increase 4.2 percent this year to $ 61,300 and that the selling price of a desktop would decrease to $ 980, both of which the CEO viewed favorably for Viking. In a related article, the CEO read that the upcoming year’s projected demand for 512 MB desktop memory modules is Qd memory = 11,200 – 100 Pmemory - 2Pdesktop ( in thousands of units), where Pmemory is the market price for a 512 MB memory module and Pdesktop is the selling price of a desktop system. The report also indicated that five new, small start- ups entered the 512 MB memory module market, bringing the total number of competitors to 100 firms. Furthermore, suppose that Viking’s CEO commissioned an industry wide study to examine the industry capacity for 512 MB memory modules. The results indicate that when the industry is operating at maximum efficiency, this competitive industry supplies modules according to the following function: QS memory = 1,000 25Pmemory + N ( in thousands), where Pmemory is the price of a 512 MB memory module and N is the number of memory module manufacturers in the market. Viking’s CEO provides you, the production manager, with the above information and requests a report containing the market price for memory modules and the number of units to manufacture in the upcoming year based on the assumption that all firms producing 512 MB modules supply an equal share to the market. How would your report change if the price of desktops were $ 1,080? What does this indicate about the relationship between memory modules and desktop systems?
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