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Article Analysis - Essay Example

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The law of supply and demand states that when demand drops, but supply remains the same, there is a lower equilibrium price. This is why EA would…
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Article Analysis
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Article Analysis

Download file to see previous pages... In business, threat of substitutes always can negatively impact sales and profit when there are alternative gaming options (mobile games) at a lower price. Lower price increases demand along the law of demand. If PC game availability increased during a period where demand for old EA games is low, it would lead to an EA game surplus and the company would not be able to offset the costs of manufacture when consumers are not demanding these products. At the same time, lower-priced mobile games are more attractive to consumers when referencing the law of demand and it is likely that many consumer segments would turn toward mobile gaming as an alternative. As a result, sales and revenues would decline and profit would be reduced as EA attempted to offset production costs for increasing supply of PC games that are not selling.
Marketing theory indicates that consumers are drawn to innovations such as the Xbox One and PlayStation 4. Even though demand is less than expected for these innovative products, as a matter of high pricing, consumers are not interested in older consoles such as the PS3. The PS3 and the Xbox 360 are entering a decline stage along the product life cycle which will, long-term, increase sales of the new gaming consoles. It is likely when price declines on the new consoles that consumers will begin demanding these new innovations in higher ...Download file to see next pagesRead More
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