An Investigation into the P.e.d, Y.e.d and X.p.e.d of The Sony Playstat

An Investigation into the P.e.d, Y.e.d and X.p.e.d of The Sony Playstation1 I have chosen the Sony Playstation1 as my product. The Playstation1 went on sale in 1995 in Britain. It quickly sold all its stock completely due to very high demand, as it was a 'new thing' at the time. It cost  £200 in the shops and stayed at this price for a whole two years however demand started to decrease rapidly after this. This could be because of new arrivals to the console world i.e. Nintendo 64. So they dropped their price to  £130 and again huge demand for the product begun and they sold out. However after a year, demand for the Playstation1 dropped, so they dropped their price again down to  £100. There was still little demand, so they dropped their price even further to just  £70 and brought it out in a new smaller design. However things never picked up as the Playstation2 was released and so no one wanted the somewhat dated Playstation1. Prices remain at  £70 today in all major shopping stores. P.e.d (Price elasticity of demand) is divined as the responsiveness of the quantity demanded of a good to changes in its own price. It is calculated by the equation :- P.e.d = % change in quantity demanded % change in price As I have found information figures when the Plastation1 went on sale and more recent figures, I have worked out the P.e.d for the Sony Plastation1. P.e.d = 0.91 ============ The result shows the Sony Playstation1 is inelastic. This means the consumers are aware of changes in the price and reflect on them to whether or not they buy the product. Because of the quite neutral result of P.e.d it shows a balance ... ...le, an increase in the price of coffee will increase the demand for tea. This, I would not expect to be true for the consoles we are talking about. Goods in joint demand however will have negative cross elasticities. For instance, an increase in the price of record players will reduce the demand for records. This I would expect to be true for the Playstation1 and Nintendo 64. The coefficient will be high for goods that are very close substitutes or complements and low when they are neither substitutes nor complements. Uses of cross elasticity of demand  · Firms can estimate the effect on their demand of a competitors price cut.  · Firms can estimate impact on demand for their product if they cut the price of a complement e.g. if they cut the price of the computer, how much will demand for software increase?