Monday, July 09, 2007

Unit 1: Price,quantity demanded and Price elasticity of demand: Playstation 3

This BBC article clearly shows the link between price and quantity demanded for the PS3 in the USA

http://news.bbc.co.uk/1/hi/business/6283170.stm

a) Why are Sony cuting the price?
b) What do they think will happen as a result of the price cut?
c) Draw a diagram to show the effect of the price cut
d) Why might demand for the Playstatioin 3 not rise as Sony expect?

A few days later, Sony announced it would not cut the price of the PS3 in Europe

http://news.bbc.co.uk/1/hi/technology/6896261.stm

e) What reasons do Sony give for not decreasing the price in Europe
f) What do the different prices suggest to you about the price elasticity of demand for the PS3 in Europe and the USA?

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