Why Intel’s stock is sinking toward its worst drop in two years
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Supply, demand and prices, Firms' costs, profits and decisions, Demand-pull inflation
What happened
Intel's stock is heading for its biggest drop in two years. Its PC business is under pressure because higher memory-chip prices are weakening demand, while corporate IT teams have less budget for laptops.
The economics
This shows how supply and demand together set prices and quantities: rising memory-chip prices raise the cost of finished PCs and dampen demand, while tighter corporate IT budgets shift demand further left, leaving Intel facing weaker sales and a falling share price. Students can draw the PC market with a cost increase and a demand decrease combined.
Evaluation
The share-price fall reflects expectations rather than final outcomes, and Intel is also affected by its own competitiveness and product cycle, so the drop cannot be attributed entirely to memory-chip prices; short-run share moves should also be distinguished from longer-run industry demand trends.
Practice question
Using Intel's PC business as an example, analyse how higher memory-chip prices and lower corporate IT budgets together affect the equilibrium price and quantity in the PC market.
Where it fits in the syllabus
- Supply, demand and prices: How a change in demand or supply in one market moves its equilibrium price and quantity.
- Firms' costs, profits and decisions: How firms decide output, prices and investment from their costs, revenue and competition.
- Demand-pull inflation: Aggregate demand grows faster than the economy can supply, pushing the general price level up.
- IB Economics: Demand, Supply and Elasticity, Aggregate Demand and Supply
- A-Level Economics: Supply and Demand, Macroeconomic Objectives, Aggregate Demand and Supply
- AP Macroeconomics: Economic Indicators and Business Cycle, National Income and Price Determination
- AP Microeconomics: Supply, Demand and Market Equilibrium, Production, Cost and Perfect Competition
- IGCSE Economics: Demand and Supply, Business Economics, Macroeconomic Objectives