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An investigation into the P.e.d, Y.e.d and X.p.e.d of The Sony Plastation1.

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Introduction

An investigation into the P.e.d, Y.e.d and X.p.e.d of The Sony Plastation1 I have chosen the Sony Playstation1 as my product. The Playstation1 went on sale in 1995 in Britain. It quickly sold all its stock completely due to very high demand, as it was a 'new thing' at the time. It cost �200 in the shops and stayed at this price for a whole two years however demand started to decrease rapidly after this. This could be because of new arrivals to the console world i.e. Nintendo 64. So they dropped their price to �130 and again huge demand for the product begun and they sold out. However after a year, demand for the Playstation1 dropped, so they dropped their price again down to �100. There was still little demand, so they dropped their price even further to just �70 and brought it out in a new smaller design. However things never picked up as the Playstation2 was released and so no one wanted the somewhat dated Playstation1. ...read more.

Middle

by estimating the effect of a price change, firms can plan the number of goods to produce, the number of people to employ and impact on cash flow. * It can be used when price discriminating to set price in each market. * Can be used by the government to estimate the impact on an indirect tax increase in terms of scales and tax revenue. * Can be used to estimate the impact a consumer spending, producer's revenue and income of any shift in supply. The next part is to look for the Y.e.d (income elasticity for demand). This is defined as the responsiveness of the quantity demanded of a good to a change in the real income of consumers. It is calculated by a similar equation :- Y.e.d = % change in quantity demanded % change in real income Again to work out the equation we need information figures of the local area. ...read more.

Conclusion

A product that rivaled the Playstation1 probally the most was the Nintendo 64, which to my knowledge came out in 1997 (two years later than the Playstation1). The coefficient may be positive or negative. Goods in competitive demand will have positive cross elasticities. For example, an increase in the price of coffee will increase the demand for tea. This, I would not expect to be true for the consoles we are talking about. Goods in joint demand however will have negative cross elasticities. For instance, an increase in the price of record players will reduce the demand for records. This I would expect to be true for the Playstation1 and Nintendo 64. The coefficient will be high for goods that are very close substitutes or complements and low when they are neither substitutes nor complements. Uses of cross elasticity of demand * Firms can estimate the effect on their demand of a competitors price cut. * Firms can estimate impact on demand for their product if they cut the price of a complement e.g. if they cut the price of the computer, how much will demand for software increase? ...read more.

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