Originally posted by Winder Fixed it for you.
Equilibrium exists when demand and supply are balanced.
Your formulation, of course, is dependent on price elasticity of demand, but that economic theorum is best applied to items in constant production, wherein expenses (such as capital loan interest payments or union salaries) must be paid whether or not units are sold. Where there is negligible current cost per unit, such as when a manufacturer makes an item in batches and holds inventory for many years (as in the case of the FA77)
price equilibrium can be controlled by matching
supply to demand rather than matching price to
demand in the face of constant
supply. It is not necessary to stimulate demand to maintain price equilibrium. To Ricoh, an FA77 in inventory is essentially stored cash. Selling a few more FA77's than normal is akin to making an extra withdrawal or two, above your scheduled monthly bank withdrawals, to meet a non-scheduled expense (such as introducing a new product or three).
An example of managing price of a constant-production commodity by changing supply for a non-economic purpose is the global price of oil, which has been managed by OPEC raising and lowering supply in response to changing demand in order to regulate price within an optimal range. Recently Saudi Arabia (whose cost of production is between $3 and $4 a barrel) chose not to reduce OPEC supply in response to
new supply introduced by IRAQ, Syria and especially US shale oil producers. The price of oil has declined 65% since November, when Saudi Arabia announced their intentions - and actually INCREASED their production. OPEC want to drive the new US producers out of business so they can maintain their market share and regain control of the oil price.
Interstingly, global Demand for crude oil is relatively constant at 95 - 96MM bpd (2015) +K1.9% annual growth. IEA says global production is 2% above that level. My current investment bank says global production is 1.6% above that level. Demand for oil has not changed much from November, 2014 trend in the face of lower price (though in the US we are consuming more oil than ever in history - ever - because consumption has dropped by an equivalent amount elsewhere due to efficiency). Overproduction of 1 ~ 2% in a constant-production commodity market is enough in the real world to alter prices by 65%. A few FA77's here or there are meaningless by comparison.
Originally posted by Winder Shortage means that prices are too low.
Surplus means that prices are too high.
If sales (demand) of the 77mm were high enough that inventory would clear before the replacement was to be launched, then there would be no reason to lower prices. The only reason to lower prices is if demand (sales) are too low to clear inventory in time.
Perhaps the inroduction of the FF was not anticipated when the production run of the FA77 ended in December, 2012, so excess inventory is not a function of demand disequilibrium, but rather a function of an unplanned market disruption (the decision to introduce a replacement lens, which is unrelated to price elasticity of demand for the FA77). Given we're not at this time seeing sale pricing of FA43 and FA31, perhaps the remaining stock of those lenses is better matched to the anticipated remaining time before replacement - or perhaps only the FA77 will be updated - maybe it's inventory is LOWER than the 43 and 31, so it is feasible to exhaust the supply and replace it NOW, while they'll need to WAIT to redo the other two. There are many possible explanations. Originally posted by Winder ---------- Post added 08-15-15 at 12:42 PM ----------
Originally posted by Winder
Virtually being the key word. There is a reason some lenses are on discount and other (D-FA* 70-200mm) are not. The sale isn't simply a matter of charity on the part of retailers. They want to clear inventory.
??? The D-FA* 70~200/2.8 does not yet exist as a product ready for sale. And B&H inventory that they want to clear might be 3 of 10 lenses they hold in regular stock - we don't know. Perhaps B&H wants to raise cash for use buying K-1's and D-FA* 70~200's - and selling a few FA77's is akin to taking some money out of the bank.
Simple economic theories are just that - but in practice the world is complex.
[EDIT:] PentaxIsDoomed™
Pentax Lens Deals - August. Looks like Demand is lackluster for the entire lens catalog.
Last edited by monochrome; 08-15-2015 at 03:18 PM.