Quote:
Originally Posted by FinancialWar
An increase in demand will increase shift the demand curve to the right, and because the supply curve is unchanged. Ceteris paribus, both the price of the M92 and the quantity supplied will rise.
from an consumer's perspective, I want the demand to fall so that the demand curve would shift to the left or the supply curve to shift to the right either by a falling production cost or increased competition from other companies. Either way, the price should fall. |
If I understand correctly, you are suggesting that if Onyx did a fantastic job at marketing the M92 and increasing the demand, then it could (and would) sell it at a higher price.
I disagree - I think that this approach is too simplistic and does not properly describe the current situation. Don't forget that Onyx is trying to maximise its total profit, simply put: (unit price - variable cost per unit ) x units sold - fixed costs. In my opinion, this would be maximized if the improved marketing came hand-in-hand with a price decrease - the potential new market would not respond at the current price.
What we don't know is the relationship between manufactured volume and cost/unit. It is possible that the economies of scale are not great and therefore Onyx cannot significantly reduce the price (even at larger volume) without hitting the limit (variable cost / unit). I am really hoping this is not the case, because I dread ending up with an oligopoly of ereader manufacturers and their boring products...