Brought to you by,

1

• Brought to you by,
• Kevin Bringman
• Mark Day
• Courtney Trich
• Brittany Basilone

2
Topics

• Kevin About Sony, What is Economics, Factors of
  Production
• Mark Prices of Related Goods, Price Elasticity,
  Importance of a Buyers Budget
• Courtney Types of Business Firms, Substitution
  Effect
• Brittany Perfect Competition, Pure Monopoly,
  Monopolistic Competition

3
About Sony

• Founded in 1945
• Today Sony is the world leader in audio and
  video communications
• Sony Headquarters located in Tokyo, Japan
• The most comprehensive entertainment company in
  world.

4
More About Sony

• Annual Sales
• Annual Sales totaling 62.3 billion dollars
  worldwide
• 20 billion in US alone
• Workforce
• Employs 161,100 world wide
• 22,000 in United States

5
Even More

• Sony Music Entertainment Inc. is the second
  largest music company in the world
• Co-developer of the CD, DVD, and super audio CD
• Sony is the sole developer, manufacturer, and
  marketer of Sony Playstation, and Playstation 2.

6
What is Economics?

• Our Working Definition is
• Economics is the study of how individuals and
  societies deal with scarcity and the development
  of methodologies for analyzing such problems

7
Factors of Production

• Land Physical space on which production takes
  place, as well as the natural resources found
  under it or on it
• Labor Time human beings spend producing
  goods and services
• Capital Long lasting tools people use to
  produce goods and services
• Physical Capital buildings, machinery and
  equipment
• Human Capital Skills and training that workers
  possess

8
How Does Sony Use the Factors of Production?

• Land Sony has seven major manufacturing sites
  and four engineering facilities located
  throughout North America

9
How Does Sony Use the Factors of Production?

• Labor With a workforce of over 161,100, Sony
  offers numerous positions in many
  departments from marketing, finance,
  legal, manufacturing, and many more

10
How Does Sony Use the Factors of Production?

• Capital Human Capital- Sony needs highly trained
  professionals to engineer and program the
  electronics they produce.
• Physical Capital- Sony must have state of the
  art technology to produce the best product
  possible.

11
Pricesof Related Goods

• Sony Play Station 2 180
• Compared to the X-Box 160
• Since the prices are similar the
• buyer can chose which one they want

12
A change in price would cause a change in
quantity demanded

• If the price of PS2 goes down, then the
  demand for them would go up
• This would cause the demand of the X-Box to go
  down

13
Sonys products are Elastic

• The lower they set their prices the more they
  will sell

14
Importance in a buyersbudget

• People have unlimited wants but limited income
• Therefore people will buy the cheaper product

15
Comparing Prices ofrelated goods

• A 36 Sony flat screen TV cost 1,799
• A 36 RCA flat screen TV cost 699
• More people will be willing to buy the
  cheaper TV

16
Which Type of Business Firm is SONY?

• Corporation
• Characteristics
• SONY's ownership is divided by those who
• share stock in the firm
• stock entitles each owner a share of the
  profit
• in the form of dividends
• limited liability owners lose only what they
• paid for their stock

17
Substitution Effect

• SONY MP3 Walkman
• 180
• If SONY lowered price to 150
• quantity demanded of
• SONY would increase

• RIO MP3 Player
• 163
• quantity demanded of RIO would decrease

P
P
Q
Q
18
Price Discrimination
Consumers are charged different prices
depending on where they shop

• In-Store Consumers
• Sony VAIO Notebook
• Cost 2099.99
• (no coupon)

• Internet Consumers
• Sony VAIO Notebook
• Cost 1999.99
• 100 e-coupon

19
Change in Technology

• Sony PlayStation enters market with Nintendo
  Sega.
• ROM chips were used in games
• Sony develops games on CD instead of ROM

20
Change in Technology

• Sony owns CD companies that already produce
  CDs
• Sony has easily available supply
• Sony can produce games at lower cost
• Can produce games in 1/10 time of ROM

21
Demand Supply Curve Shift

• Supply Curve Shifts to Right

• Firms Labor Demand Curve Market Labor Demand
  Curve Shifts to Right

22
SONYs Costs Expenses

• Explicit (money paid for inputs)
• land 1766 mill
• buildings 8564
• machinery
• equip. 18650
• construction 637
• income taxes 321
• 29938 mill

• Implicit (no direct money payment for inputs)
• opportunity cost of
• a) land - rent forgone
• b) money - investment income
  forgone
• c) time - labor income
• forgone

23
Is Sony part of a Perfectly Competitive Market?

• Remember the necessary requirements?
• Atomistic Actors
• Homogeneous Products
• Easy Entrance/Exit
• Perfect Knowledge
• Electronics
• Including TVs, VCRs, Radios, CD players, DVD
  players, Computers, Cell phones
• Sells millions worldwide

24
Is Sony part of a Perfectly Competitive Market?
(cont)

• Atomistic Actor buyer/seller is like grain of
  sand
• Yes- other companies make electronics, just like
  Sony
• Homogeneous Products if consumers perceive
  products as being the same, company must treat
  accordingly
• Yes- consumers treat product the same, even
  though it is produced by different companies

25
Is Sony part of a Perfectly Competitive Market?
(cont)

• Easy Entrance/Exit no artificial barriers
• Yes- many super power companies (partial
  monopolies) already existing but always room for
  more
• - always a demand for electronics
• - always technology advances

26
Is Sony part of a Perfectly Competitive Market?
(cont)

• Perfect Knowledge buyers/sellers know same
  information both are aware of cost and quality
  and what the other is doing
• Yes- Sony prints features on boxes
• - visit the Sony website to research for
  information or call helpline with questions

27
Is Sony part of a Perfectly Competitive Market?
(cont)

• Perfectly Competitive
• Yes when dealing with the market of
  electronics, atomistic actors, homogeneous
  products, easy entrance/exit, perfect knowledge
  are all present
• Lets look and see if any of Sonys markets are
  monopolistic.

28
Is Sony part of a Purely Monopolistic Market?

• Remember the necessary requirements?
• One seller with no close substitutes
• Narrowly defined market (Marketing Myopia)
• PS one LCD Screen
• Newest Sony product
• PS one system small LCD screen- large demand
• Sold together at bargain price

29
Is Sony part of a Purely Monopolistic Market?
(cont)

• One seller with no close substitutes
• No- Sony is only producer
• Narrowly Defined Market Market Myopia
• Yes- only product of its kind

30
Is Sony part of a Purely Monopolistic Market?
(cont)

• Yes- market of newest product (LCD Screen PS
  One Combo)
• Lets see if any of Sonys markets are part of a
  Monopolistically Competitive Market.

31
Is Sony part of a Monopolistically Competitive
Market?

• Monopolistic requirements
• Producing heterogeneous products
• Downward sloping demand curve
• Marginal Revenue curve (MR) is below Demand curve
• Competitive requirements
• Large number of buyers/sellers
• Relatively easy entrance/exit

32
Is Sony part of a Monopolistically Competitive
Market? (cont)

• Recent products
• Include Digital Cameras, Handhelds, PDAs, Video
  game hardware, Flat Screen TVs
• Advances due to technology improvements
• High Demand (very popular)

33
Is Sony part of a Monopolistically Competitive
Market?

• Monopolistic requirements
• Heterogeneous products consumers perceive as
  different products
• Yes- considered different even though similar to
  other brands
• Downward sloping Demand curve

P
34
Is Sony part of a Monopolistically Competitive
Market?

• Competitive requirements
• Large number of actors
• Yes- (recent product) many producers
• Relatively easy entrance/exit
• Yes- high demand (everyone wants one) so many
  brands are selling

35
Is Sony part of a Monopolistically Competitive
Market?

• 3 choices
• Perfectly Competitive Markets (electronics)
• Purely Monopolistic Markets (PS one LCD)
• Monopolistically Competitive Markets (new
  products)
• Sony belongs to many different markets with
  varying products falling into different
  categories.

36

• Any Questions?