Wednesday, December 7, 2011

Supply and Demand: The Computer Industry.

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The basic concept of supply and demand is really quite simple. When the supply is high and the demand is low, the price of the item in question is also low. If the demand is high and the supply is low, then the price is bound to be high. This can demonstrated best with computer parts, in particular, memory (random access memory or RAM). Supply and demand is what runs economics and the computer industry.

When computers first became popular in the mid to late 80s, prices were outrageous, ranging from $4,000 to $8,000. The price of memory to upgrade was $100+ (and that was for a 4 MB stick of RAM.) Supply wasnt very high but the demand was there. On top of this, computer companies also created proprietary equipment, meaning that only certain types of equipment would work in certain machines. This in turn forced people to have to pay such ridiculous prices if they intended on upgrading their computers.

As the supply started to increase and the demand decreased (due to people not wanting to pay very much) the prices started to drop. But the drop wasnt that sufficient. As the internet gained popularity and applications became memory intensive, the computer industry once again started to increase the prices. But it wasnt just due to those two things. It was also because memory was being created that was supposed to be faster than what was previously created. This caused the older memory prices to decrease and the new memory prices to increase. Also coupled into this was equipment was starting to become non proprietary meaning that the memory would work in any machine. This helped the prices a little bit because now the prices were strictly being governed by the industry as a whole rather than one or two companies.

It wasnt until the late 0s that prices for memory dropped drastically. The supply was very high and as speeds of memory and sizes of memory increased, the demand increased as well. But the supply was so high that the prices couldnt be increased, otherwise people wouldnt buy any memory.

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So, as you can see, supply and demand has played a huge role on the way that the computer industry is treated. Supply and demand is what governs the way that economics functions. It is what has made the life of every computer owning American easier.

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