One of the our friends recently mused that the price of the 32 inch HDTV seems to defy gravity. If anything, the prices seems to have risen slightly between last year and this year. He was looking at a name brand 32 inch HD TV last year at the price point of $350 but he waited because he thought it would drop down to below $300 by this year. However, much to his chagrin, the price for the same model this year has risen to $399.
What gives? Don’t electronic prices usually drop with time along with Moore’s Law? Well, this was a good time for us to explain the macro-economic theories that affects our life. In effect, electronic prices usually do drop with time as better yield methods are produced and more advanced technology show up in the marketplace. However, the last few year, a confluence of events prevented the traditional downward trajectory to take place.
First, because of the global economic slowdown, most manufactures pared back their research and development budget. Decreasing the newer technology that traditionally showed up in the marketplace and forced lower prices for older technology. In fact, the only big advance in the HD TV market in the last few years is the advent of 3D, which has a limited appeal for consumers.
Second, the American dollar due to the recession has been weakened in the global marketplace. In this case, especially against the Chinese Yuan, where most electronics are produced. This means the exchange rate gap for the two are smaller. Hence, higher prices for American purchase of Chinese produced goods.
Finally, the recent events in Japans caused a supply chain shortage in the global electronic marketplace. As for standard economics, scarcity of a resources usually drive up the price of the say resources. So this further prevented the decline of the prices in electronics.
So while this won’t always be the case, this is one of the few times in history that electronic prices did not drop as much as expected within the standard time frame. However, most of the time, we still recommend consumers to wait till the last-minute to purchase their electronics.
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