Some consumer electronics products such as plasma TVs, DVD players, and digital cameras, are introduced at very high prices but over time, their prices start falling (beyond what could be attributed to falling costs as companies take advantage of economies of scale and cheaper technologies).Which of the following is the best explanation for this observation?
A)More firms are likely to enter the consumer electronics market over time, forcing market prices down.
B)Early adopters of these new products typically have a higher demand and higher income compared to those who are willing to wait.
C)Early adopters are more quality conscious and are willing to pay higher prices for the initial production of these goods.
D)After satisfying the demand for early adopters, firms lower price to attract the more price-sensitive consumers.

Question

Quizplus · Accepted Answer

After satisfying the demand for early adopters, firms lower price to attract the more price-sensitive consumers. This is a common strategy used by firms to increase sales after the initial hype dies down, and it explains why prices tend to fall over time even beyond falling costs due to economies of scale and cheaper technologies.

Some Consumer Electronics Products Such as Plasma TVs, DVD Players