Gadgetory

I've been asked this a number of times in regards to inflated graphics card prices why not just regulate them as in why doesn't the government step in and set a maximum price for said graphics cards to prevent those greedy companies from reaping all the money they can in economics this is called a price ceiling studying this a bit of my MBA finance classes this quarter so I thought a video would be a cool review guide of sorts totally selfish here and to answer this question I will need my trusty whiteboard welcome to crash course now I was supposed to say that sorry for the awkward pause there so I'll be speaking with respect to the United States here a majority of my viewers do live here and I am most familiar with our own laws and economic policies I certainly don't want to speak out of place but things might be different where you live so just keep that in mind in the US though a price ceiling is a government mandated maximum price for a specific good now if you recall from elementary economics our linear supply and demand curves equilibrium price exists at the intersection of the two trends they're actually curved somewhat like this so this is where both consumers and producers are stable and comfortable in their buying and selling habits there is no incentive from sellers to raise prices and there is no incentive from buyers to seek alternatives now in the case of the graphics card market we have no such price ceiling regulation suppliers and AIB manufacturers offer suggested retail prices to their vendors if they're not the vendors themselves who in turn adjust prices according to fluctuations in these two curves so in short no one is being forced to keep prices below a certain value which is what a price ceiling would otherwise do today's GPU market looks something like this with the demand curve shifted to the right signifying an increase in demand for all graphics cards at all prices thanks largely to mining and with the supply curve shifted to the left which is typically a response to an increase in price or quantity demanded for the purpose of preserving inventory now if at any point demand for a certain card increases unexpectedly then a temporary market shortage will exist no this is just a slide along the demand curve is not another shift in the entire curve itself the shortage is identified by this gap in the two curves until supply is restocked keep in mind our x-axis here is quantity so since we've deviated from market equilibrium what we'll be left with is something like this and this is essentially what would happen if a binding price ceiling was instated we see it in retail stores all the time consider the Fry's Electronics I visited in Vegas shortly after CES you can watch a full video right here but in a section of it we highlighted the graphics card stock which was completely cleaned out at least for anything above like rx 460 and 1050 Ti caliber this is what happens when retail stores set artificial price ceilings in microeconomics if we consider a retail store supply and demand curves for certain good we'll still have a market equilibrium a binding price ceiling then would look something like this a dotted horizontal line below the intersection the result is excess demand indicated by the length of this line between the supply and demand curves so the lower the price ceiling is below the market equilibrium the greater the disparity between quantity supplied and quantity demanded I tried looking for examples of price ceilings online and I kept finding the same one rent control apparently this is more of a common thing today in Europe the US was engaged in this to an extent after World War Two but in a nutshell rent control is typically a mandated price ceiling for apartments on the market ergo landlords and owners can't charge more than a certain price per unit area of apartment space in a given location some ceilings are sloppy though and are blanket price fixes across multiple locations of buildings so it doesn't matter in in those cases whether you have a really big apartment or a small one or if it's close to the center of town or not they'll all be the same blanket price right that's the cat the highest you can charge and that's a much bigger problem but even for the ones that consider other economic factors there are very apparent downsides firstly supply shortages and while these happen on and off in capital markets all the time like we have goods that go out of stock for a while right that's normal they aren't typically prolonged or permanent like those created from price ceilings this is where the downward spiral begins once consumers catch on with lack of supply they'll likely seek alternatives this is where they use graphics card market and arcade comes into play or competitors like AMD's Raven Ridge APU lineup if enough of the supply is dried up a few companies may exit the market or reallocate resources but if enough of the suppliers go out of business then the price ceiling fails since the new level of supply falls below the price ceiling mandates so it really is doing nothing it's non-binding if the ceiling is then abolished the prices will skyrocket right and new suppliers will enter the market to take advantage of the potential profits and if enough manipulation takes place another price ceiling will be instated and the cycle continues companies may also resort to mischievous tactics in an effort to work around the price ceiling mandate we've seen this time and time again not just with price ceilings for example graphics card suppliers could collude with each other and sell to u.s. citizens and European markets through foreign distributors apart from import taxes foreign goods aren't subject to domestic price ceilings so they could cut off the u.s. supplies and then force everyone to to the European markets right to channel through them because there they can raise prices to whatever they see fit so in short a price ceiling is just a short term remedy consumers see these as mere windows of opportunity to buy up as much of the supply as possible while it lasts which is why many retailers and post purchase limits for things like graphics cards in an effort to preserve supply as much as they can what most don't expect however is the inevitable shortage they will soon experience as a result of the binding price ceiling which is why retail stores in particular seem to always be out of stock especially if they're trying to keep prices down for the general consumer so to answer this question I don't think graphics card regulation is a good one in this current market to pursue as stated in the video I pointed to earlier one of the only instances in which I'd recommend government intervention at this level is in the case of corporate collusion when cartels or oligopolies begin to take advantage of the little man right they collude to elevate prices without an economic incentive apart from profit and they should be regulated period it's why Commission's like the FTC in the United States exist they're there to preserve the perfect competition model or as close to perfect as possible of course nothing that we make or try to maintain is ever really perfect better to have some stock though at higher prices than no stock all that's at least how I see it you may disagree let me know if you do in the comments below if you like this video we should let me know give someone a thumbs up I appreciate it thumbs down for the obstacle subscribe but if you have it already in stay tuned for more content like this this is science studio thanks for learning with us