Reasons For Falling Price Of Electronic Goods? Do you ever wonder why the prices of electronic goods are constantly decreasing? Here are the experts’ thoughts on why electronic and computer goods are becoming less expensive.
What is the cause of the drop in the price of electronics? What are the various factors that influence computer/electronics hardware pricing? Why do computer items become cheaper year after year during the Union budget? What is the reason for them?
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Reasons For Falling Price Of Electronic Goods
Reasons For Falling Price Of Electronic Goods? Any new technology, particularly electronic goods (computers, TVs, and cameras), tends to see a sharp drop in price over time. Initially, modern tech is very expensive and consumes a large portion of disposable income, but prices tend to fall significantly over time. There are several explanations for the price drop.
- Quantum advancements in technology are lowering production costs.
- Scale economies from increased production
- Growing competition as more companies enter the market, causes prices to fall.
Here is an example of price gouging. Initial high prices to exploit customers with inelastic demand. An example of a falling price for high-tech televisions
- Westinghouse’s first color television was $11,875 in 1954.
- 1997 $22,924 Philips/Fujitsu Flat Plasma TV
- 2007 Pioneer Elit Kuro (50′′) $7,046
- Panasonic Plasma 2012 $2,680 (55″) \
- 2019 Hisense 65H9F LED 65″ 4K TV – $599
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What reasons For Falling Price Of Electronic Goods dramatically over time?
It is clear that the price of electronic products is falling over time. So what are the exact reasons why this happens? Here are the Reasons For Falling Price Of Electronic Goods:
Technological advancements
The main driver of falling computer/tv/electronic item prices is the rapid advancement of technology over the last 50 years. Gordon Moore (co-founder of Intel) discovered that the number of circuitry in an integrated circuit doubles every two years. This causes an exponential increase in computing power, allowing for more computing power at lower costs. Because of advancements in microchips and computing power, more powerful goods can now be produced at lower costs.
With a product like television, new technology has allowed better picture quality at a lower cost. Moore’s Law is beginning to slow. As the size of microchips shrinks, technological advancement will slow. There will be constraints. However, technological advancements have frequently exceeded expectations.
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Scale economies
Firms with low sales volume when modern technological products are first introduced to the market face both high costs of investment and limited opportunities for economies of scale. Firms can broaden production and benefit from technical as well as other economies of scale as the market grows. Average costs will fall as production increases.
Television sales were restricted to a particular segment of the global market in 1954. TV sales are expected to be significantly higher in 2019 – global sales in 2017 were approximated to be 229 million.
Competition
As the demand for electronic goods grows, more firms enter the market, resulting in an increase in supply as well as price competition to lower prices. The television market is now highly competitive, with consumers able to easily compare prices online and purchase the cheapest model. This increased supply causes pressure to fall.
When Apple first released the iPod, it could purchase for a premium price (the release price was $399 in 2001), but within a few years, other companies released lower-priced digital music players, putting pressure on Apple to lower its prices as well. Now there are music streaming players for less than $50.
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Price gouging
When a modern technological product is launched, the company has an incentive to set a high price in order to capture the demand from clients with really inelastic demand. Some technology enthusiasts are willing to pay exorbitant prices to obtain the latest electronic good or trends.
After selling to these consumers with the very quantity demanded, the firm can reduce the cost to sell to a larger audience with more price sensitivity.
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Why does it appear that the cost of mobile phones is rising?
The cost of electrical items does not always decrease.
The cost of Apple iPhones has recently risen. The most recent models have tended to be more costly, and we have not seen the same dramatic drop in price. The reason for this is that, rather than lowering prices, Apple is leveraging technological advancements to provide more functionalities and more potent phones. The goal is to provide better phones rather than cheaper phones.
Because phones are so important in modern life, the cost is not the most important factor. The importance of quality and features is greater. As a result, consumers are not looking specifically for a cheaper phone, but rather an upgrade – even if it is more expensive.