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To: pgerassi who wrote (247823)	2/14/2008 4:28:17 PM
From: wbmw	Read Replies (1) \| Respond to of 275872

Re: You try to make a failed argument that the CPU market is elastic. Then you try to make a strawman out of budgets limiting CPU pricing strategy. No, Pete, again you are confusing strawmen with supporting arguments. Pricing elasticity has to do with the necessity of an item, such that the demand for it has either much to do with the price, or little to do with the price. In the case of microprocessors, they aren't thinks like "water", or "antibiotics", which a person might need to live. These things are very inelastic items. Microprocessors are essential for connecting to the Internet, but most people in developed nations already have one or more of them. It makes it very non-essential for them to have more than one, or to bother to upgrade if the added performance/$ isn't there. And raising prices defeats the performance/$, making it a very elastic commodity. At least, that's the case for the existing installed base. I made a separate supporting argument about emerging markets and people on fixed incomes that can only afford a compute if it's sufficiently inexpensive. Due to computers being out of reach in these segments until just the last few years, an incredible surge in demand has emerged for ultra-low cost PCs. Raising prices in these segments will be prohibitive to these people affording a computer, and sales would drop. So since you are no doubt still confused, let me make it very easy for you. I have 2 arguments against Intel raising prices: 1. Price elasticity of demand is present due to microprocessors being a very non-essential item in mature markets. See: en.wikipedia.org 2. Developing nations require ultra-low price points in order to grow and enable new markets for people who could not have afforded them before. Raising prices is counter-productive to growing these markets. Now, take 1 and 2 together, and Intel is in a position where raising prices significantly would hurt sales. It really is simple enough for a child to understand, so I guess it's excusable in your case that you have yet to fully grasp it.