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Decrease In Supply of Playstation2

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Introduction

Commentary #01 Silvia Panico October 24, 2000 Section Covered: 01 Word Count: 436 Mike Musgrove, (10/20/00), Supply, Demand and Playstation2, Washington Post, E1-13 Decrease In Supply of Playstation2 This article entitled Supply, Demand and Playstation2, talks about a new game console which should be released in stores the 26th, October. Sony Computer Entertainment Inc. is expecting, by releasing 1 million consoles only in the United Sates, a complete sold out by the first weekend. But now, because of a missing part (supply shifter), Sony is forced to reduce that figure in half. Experts are also expecting 4 million customers in the USA who are going to want to purchase the new Playstation2 right away. ...read more.

Middle

In this case we will see a decrease in supply which will shift its curve to the left. This movement is created by the fact that the point where the Playstation2 production is now, is not included on the curve because if the supply quantity would be going down the price would have to decrease instead of remaining constant . Demand, instead, will remain constant, in fact changes in prices are included on the curve, so it will not shift. We can notice that this creates a new equilibrium point ( Fig. 1), but because Sony is not increasing its prices for each console, it will not be able to meet it. ...read more.

Conclusion

So by increasing the price, the shortage would be reduced. In conclusion to keep the shortage as small as possible, the price of each Playstation 2 will have to rise until an equilibrium between the supply and demand curve is reached. In this case, even though the demand will not be met immediately on October 26th, Sony promises that more consoles will be produced this upcoming weekend, so that the 4 million customers will be able to purchase a Playstation2, maybe not this Thursday, but sometime in the next month. Because the production will not stop, the prices will not have to increase so much to the point where no one will want to buy the product anymore. ?? ?? ?? ?? ...read more.

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