Re: Some interesting economic facts

["Matt Deatrick" <mattd@shocking.com>]

That is called a reservation value to an economist. And if you have ever
seen a collection of them they form a downward sloping line called a demand
curve. People sit all over this curve, some below equilibrium(market) price
and some above. Those who are willing to pay more than what they actually
have to pay enjoy what is called a consumer surplus. Those who do not get
to buy the product because their reservation price is below market price
exist in the area called a deadweight loss. 
	I realize that some people only want to buy software that is expensive
because they associate that with quality. But I beleive we would be fools
to think that people wouldn't rush to buy M$ products at 5$ a pop. Which is
not what I am suggesting necessarily. The O/S, however, should be
price-controlled in my opinion. Fancy applications should be viewed as
luxury goods. And basic internet connectivity should be included in the
O/S. That is my personal opinion.
	Matt

----------
> From: Katharine M.J. Osborne <kosborne@rocketmail.com>
> To: mattd@shocking.com; am-info@essential.org
> Subject: Re: Some interesting economic facts
> Date: Wednesday, April 22, 1998 10:52 AM
> 
> Yes, MS could be selling their products for a song, but
> consumers have a certain perception of what software
> should be valued at. What is a certain product worth to
> them? What does the consumer think it should be worth?
> That percieved value is shaped a lot by marketing, as well
> as the standard prices set for each individual product
> category. We are afterall the people willing to by
> T-shirts for $20 that cost pennies to make.
> 
> KaOs
> ---Matt Deatrick <mattd@shocking.com> wrote:
> >
> > 	Have you ever heard of the term "increasing returns?"
> It means that
> > as you sell more items your profits go up rather than
> down, as is usually
> > the case(called diminishing returns). Software
> development adn production
> > follows these criteria: high initial cost(R&D), near
> zero marginal
> > costs(the cost of producing one more unit). The pricing
> laws of economics
> > state that price should equal marginal cost. This is due
> to the fact that
> > if you sold more you would lose money(your revenue from
> one more unit would
> > not exceed your production costs of one more unit-
> negative profit) and if
> > you sold less you would not be maximizing profit(you
> could produce one more
> > unit and make a profit because your marginal cost for
> that unit would be
> > less than your revenue). Ok, that was long. The point is
> that marginal
> > costs for software are almost zero! And given the nature
> of increasing
> > returns, M$, theoretically and economically speaking,
> could sell software
> > at marginal cost, or just above it, and still make a
> healthy profit!
> > 	Expensive, in this case, is simple greed.
> > 	Matt
> 
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