Live in your world…play in ours

1. Live in your world…play in ours Natalie Stewart Katie Poelking Joel Cortileso RD Buckwalter

2. Table of Contents • What is Economics • Price Discrimination • Opportunity Cost • Government Intervention • Income Effect • Perfect Competition • Oligopoly • Diversification • Factors of Production • Demand

3. What is Economics? • The study of choice under conditions of scarcity. • Economics is a social science that studies aspects of human behavior relating to working, producing goods, distributing them, and consuming them.

4. Price Discrimination • Price discrimination is when a seller charges different prices to different consumers for reasons other than differences in production costs.

5. Sony Price Discrimination • Sony uses coupons as a way to attract customers. This • is a form of price discrimination. No Price Discrimination Price Discrimination P P P* p1 p2 p3 Q Q* Q q* q2 q3

6. Opportunity Cost • Opportunity cost is the value of the best alternative • Or alternatives, sacrificed when a firm focuses resources • On a particular action.

7. Sony’s Opportunity Cost The decision by Sony to produce a new gaming platform Involved an opportunity cost. By focusing resources on this New gaming unit, PS2, they gave up their best alternatives Such as simply improving the current PS1 and improvements Of their computers.

8. Government Intervention • Government intervention is when the government • takes a position of mandating that a firm comply with • particular policies for the common good of the general • population.

9. Government Intervention in Sony • The FCC (Federal Communications Commission) recently • Mandated that by the year 2004 or 2007, depending on the • Size of the television, all televisions will be required to have • The capability of transferring digital signals. • As a result of this government intervention, Sony and other • Producers claim the cost to consumers will rise because of • An increase in production costs versus current analog TVs.

10. The Income Effect • Income effect states that as the price of a product decreases • The consumer’s purchasing power increases, causing a change • In the quantity demanded for the good. Inferior Good vs. Normal Good

11. P ↑I D1 D2 D1 QD Income Effect on TV Sales • Sony Corp. produces two types of television sets. The Trinitron • Series is the typical TV found in most households, and sells for a • a reasonable price. On the other hand, the Wega flat screen TV • sets sell for nearly twice the price. P QD

12. Perfect Competition • In order for a company to fall under perfect competition they must • Satisfy three criteria: • There must be a large number of buyers/sellers • The product must be standardized • Sellers must be able to easily enter and exit the market

13. So…how does Sony fall under Perfect Competition? • There are a large number of sellers pf mainstream consumer • Electronics such as TV’s, DVD players and CD players i.e. Zenith, Apex, • Phillips…. There are also a large number of buyers for these products, • Sony recorded sales of $18.5 billion in its’ last fiscal year. • Many of Sony’s products are standardized, in that you can not find • much difference between a Panasonic and Sony TV. • Many (however not all) of the markets Sony represents are easy to • enter and exit. Portable audio players, car audio and electronic accessories • are all examples of this.

14. Oligopoly • An oligopoly is a market structure with very few • firms that are producing either: • Homogeneous product • or • Heterogeneous products

15. But I thought Sony fell under Perfect Competition! • Play Station 2 is an example of an oligopoly • market that Sony participates in.

16. Diversification…hmm • Diversification is the process of reducing • risk by spreading sources of income among • different alternatives, such as different • consumer goods.

17. How has Sony Diversified??? • Sony has become a conglomerate because • of its diversification into multiple industries. • From consumer electronics to music • Production. Electronics, Gaming, Music……….

18. Factors of Production • Factors of production are the result of the • Land, labor, capitol and entrepreneurial • activity that are used in the manufacturing • of a particular good and service.

19. What are Some Examples of Sony’s Factors of Production • Land: The land which the factories and offices reside • Labor: The worker that are employed by Sony • Capital: • -Human Capital: Training of employees • -Physical Capital: Equipment used to assemble TV’s • Entrepreneurship: All risks that Sony faces by marketing their product

20. Factor Markets • Households- Supply of Resources • Firms- Demand for Resources Supply Demand

21. Demand • Is a relationship showing the various amounts of an item which buyers are willing and able to purchase at various possible alternative prices, during a given period of time.

22. Playstation 2

23. Sony PlayStation 2 in High Demand • Sony is selling more PlayStation 2 consoles than they have the money to produce the chips. • Surging Christmas sales of its Playstation 2 games console have helped Japanese tech giant Sony record its strongest earnings increase in company history.

24. Conclusion • Sony continues to achieve advancements in the • consumer electronics industry. These advancements • along with continued industry growth and a willingness • to remain Innovative have put SONY at the forefront • of this latest revolution. • Sony is an excellent candidate for economic analysis • because of its broad spectrum of products.

25. Works Consulted Hall, Robert E. and Lieberman. Economics: Principles and Applications. Southwestern: 2001. Sony Inc. Website @ http://www.sony.com Wired Website @ http://www.wired.com/news/digiwood/0,1412,54426,00.html Sony Corporation @ http://www.sony.net