Supply_and_Demand

Supply & Demand Paper Monica S. Davis XECO 212 January 30, 2011 University of Phoenix (Axia) Supply & Demand Paper There is one game system I know everyone wanted when it first was announced to consumers and that was the Wii. I know that everyone wanted this particular game system and my husband was part of rush. This new system was one that the entire family would enjoy from small children to adults to grandparents. My husband and I decided to purchase this system for our sons. We went to Best Buy to purchase the Wii but discovered it was sold. This meant that Best Buy did not meet the demand for supply on this game system; this game was one that everyone wanted but customers had to be quick in their movement to purchase the Wii. With supply when the price of a good rises, the quantity supplied of the good also rises, and when the price falls, the quantity supplied falls as well (Gregory Mankiw, 2007). With demand, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises (Gregory Mankiw, 2007). I am sure we have experienced this with a lot of things we like to purchase such as certain eye makeup, or a favorite brand of golf clubs. One main factor with the purchasing of the Wii was the price. When this game system was first introduced to the market the price was $249 and now you are able to purchase it for $199. Since the price went down to $199 I would take that as the demand not being as high as it was when it first came out. Another reason for demand decreasing was because when the Wii first came out there were not a lot of games for this system. I believe this was a big problem for Nintendo because most customers want games to go with their new game system. If you have no games to play you will not play with your new system. Another example of supply and demand would be customers waiting for the price to come down, because of the current state of the economy all consumers are looking for a great deal. Substitutes are often pairs of goods that are used in place of each other. Substitutes are two goods for which an increase in the price of one leads to an increase in the demand for the other (Gregory Mankiw, 2007). The Wii balance board is a substitute for medical equipment. Nintendo has a balance board which typically costs about $100 and has a game included, is performing with $18,000 medical equipment used in helping stroke victims regain their balance (Entertainment Consumers Association, 2011). The Wii along with the XBOX 360 and Playstation 3 all have some type of motion controllers to offer their customers. These three game systems are all substitutes for one another competitively (All Voices, Inc, 2008). Complements are two goods for which an increase in the price of one leads to a decrease in the demand for the other (Gregory Mankiw, 2007). The Wii offers its customers the Wii Fit, as well as motion controllers, and you may purchase the system in three colors, red, black and white. With the Wii Fit you are able to work out in the comfort of your own home, and never have to worry about going to a gym with a paid membership. With the motion controllers you do not have to be right in front of the TV for it to pick up your motion. I believe another appealing thing to customers is the fact that you have choices on the color you want. One last thing that the Wii complements is physical therapy. It does not take the place of therapy but will be very useful to patients for that in-between therapy until the next appointment (CS Communication LTD, 2011). I will attempt to explain how the necessity of purchasing the Wii impacts price elasticity. To do this I will first give you a definition of price elasticity and how it impacts the Wii. Price elasticity is a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price (Gregory Mankiw, 2007). With the Wii I believe if Nintendo was to sell it any higher than $249 that their sales would not have been good at all. Their demand was much higher because consumers thought they were getting so much more for their money, when in all actuality you were only receiving one game with multiple games in that game. The concept, I believe, for Nintendo is that they will get more customers if they can offer the customer the game they want and also include five or six free games per disc. References All Voices, Inc. (2008-2011). Local to Global News. Retrieved from http://www.allvoices.com/contributed-news/6362809-xbox-360-competitive-analysis CS Communication LTD. (2011). Know it All Health.com. Retrieved from http://knowitallhealth.com/2008/09/24/research-shows-rehabilitation-benefits-of-using-nintendo-wii/ Entertainment Consumers Association. (2011). Game Politics.com. Retrieved from http://www.gamepolitics.com/2010/01/19/wii-balance-board-substitutes-costly-medical-equipment Gregory Mankiw, N. (2007). Principles of Economics, 4e (4th ed.). Florence, KY: Cengage Learning.