Wbmw:
Try telling that to a user who needs access to the DB to do his/her job! Try telling a secretary that a PC isn't needed when she works with documents that come across her desk in Word format! Try telling that to the forklift operator in a warehouse that he doesn't need the wireless PC with the bar code scanner to get what operation he needs to do next! Try telling that to the salesman who does presentations of the company's products using a LCD projector off his laptop!
Your silly argument is like the rest, totally false.
If you would read the links you give rather than assume, you would see that the second sentence from the link, "The demand for a good is relatively inelastic when the quantity demanded does not change much with the price change." In simple language, you change the price and look at the demand. If it changes less than the price change, the market is inelastic. If it changes the same, its neutral (unitary elastic). If it changes more, its elastic.
In practice, test and find out. That's the scientific method. Gather the facts of the market. Come up with a theory. Devise a test for that theory. Test the theory. Look at the results. Change theory to fit the results and the previously gathered facts. You have done only the second part (you neglected to gather the facts). You have failed to come up with a test of your theory (you just seem to assume its true) and any subsequent actions.
Lets look at the past history. Intel cuts their price by 50% on their desktop CPUs on July 22, 2007 (early Q3/07). Do they sell twice as many CPUs? Lets look at how many they sold in Q3 versus Q2 using Mercury. Intel desktop market share gained 1% from 72% to 73% on flat desktop shipments. Thus cutting prices 50% didn't add much to demand, just 1.4%. 0.50/0.014 = 36. Thus to double demand prices would have to shrink to 1/36 of current prices. That is quite inelastic.
Page 7 of 28:
download.amd.com
That describes what happens to the whole CPU market, but not to that extent. You do not get twice the demand at half the price. You may get 5%, if that. The above shows only 1.4%.
Now we are not talking PCs, but a component that goes into them. So your arguments about PCs are not germane to the CPU market. And using the third world also assumes things like software piracy and hacking to get software at little or no cost. But they are just as likely to steal the computer as well or buy it used. Again they really don't impact the typical PC market except as a good way to get rid of old computers.
So I see that you are ticked off that your arguments just haven't worked. So lets pile it on and scuttle what little you have left:
1. Price inelasticity of demand is present due to microprocessors being essential to many people and people only see a fraction of any percentage price increase. Mature markets do not imply price elasticity (the oil market is a good example). Even non essential items in a mature market does not imply price elasticity (the yacht market is an excellent example (if you have to ask the price, you can't afford it)).
2. Developing nations do not require low price points. Look at construction equipment and mining shovels for instance. They pay the same going rate as the developed nations. They also pay the same for CPUs as the developed nations.
3. The high reduction in price to sell a few more PCs to anyone should tell you right off that the market is inelastic. To get 1.4% more units, you have to drop the prices in half. The very definition of a price inelastic market.
Intel may hurt sales by doubling its prices, but revenue and profit will go up because sales won't be cut in half. Certainly they will lose some sales to AMD, until AMD hits its capacity limits. But doesn't the original argument make it given that AMD is out of the x86 CPU business? So no sales are lost to AMD. Some sales are lost to marginal customers who will wait a little longer (eventually they will come back). But the bulk will pay the higher prices and grouse about it. So Intel loses a few unit sales, but doubles CPU revenue and does far more in increasing its profits both as a percentage and in absolute dollars.
Its really simple to anyone who looks at the evidence rather pushing some cockamamie theory to the exclusion of all else.
Pete |
