First, you need to stop talking about revenues -- they are irrelevant. The relevant issue is economic profit. A reduction in price may result in a reduction in revenues, but may also result in an increase in economic profit owing to steep reductions in costs.
Second, what are the sources of your data, and are the data meaningful? So far as I know, all of the major PC vendors increased their PC revenues during the year. So from where is the downturn attributable?
Elasticity of demand is a very difficult thing to measure, as are demand curves. Under the the best of circumstances they require rather sophisticated econometric models and result in a cluster (rather than a scatter) of points that make such estimations quite dicey -- and that's when you use commodities such as oil which are immutable. But computers and components are rapidly evolving, so is it fair to draw conclusions based on a short period of time when technology is in a state of flux?
Finally, firms are long-term profit maximizers. That means that they may opt to decrease short-run profits with the intention of eventually realizing larger long term profits. For example, in the face of an oversupply of DRAMs, Korea continued to build fabs in hopes of increasing their market share, and hence the present value of the stream of free cash generated by those plants.
So to make any meaningful economic argument you need to move to a multiperiod analysis time frame.
TTFN,
CTC |
