Supply, Demand, And Price Change

Supply and Demand are the two most used words in economics (Colander, 2004 p.83). My basic understanding of these two terms is that: When there is a lower supply of something than meets the consumers wants, only those willing to pay a higher price will be able to satisfy their demand. Likewise, when there is a higher supply of something than is needed to satisfy the wants of consumers; theoretically, consumers will be able to buy their article at a lesser cost. With the holiday season upon us, and Christmas under a week away, the supply and demand of items seems to be a perfect subject with which to begin a class about economics. Throughout this paper, I will give some insight on the supply and demand of one of this seasons most sought after items; Microsoft's Xbox 360. I will also explain how the current supply and demand situation has tampered with the prices people are having to pay in order to acquire one of these toys.

The Xbox 360 is available in two different versions. The Xbox 360 which is often referred to as the "Premium Edition", and The Xbox 360 Core System. The cost of the Premium edition system is currently $399.99, and includes a hard drive (needed to play original Xbox games and to play live online), wireless controller, headset, ethernet cable, Xbox Live silver subscription, and a component HD audio / visual cables. The Xbox 360 Core System is now $299.99 and is a basic console with a 9 foot long corded controller, Xbox Live silver subscription, and standard audio / visual cables (Wikipedia, 2005).

"Most retailers have refused to say how many of the consoles they have in stock, but Microsoft has conceded that an ambitious plan to launch the console worldwide within a few weeks will mean fewer consoles initially in North America." (CNN.com, 2005). This statement made by Microsoft representatives, warned consumers that there was a low supply of this product, and that there would continue to be a low supply, for some time.

Microsoft's Xbox 360 began to be sold in the United States on November 22, 2005, in the United States. On November 21, 2005, people were standing in line at stores waiting for 12:00am. Hoping to buy an Xbox 360 the very day it came out. Many people were disappointed however, and were forced to go home without their new game console. "At a 24-hour Wal-Mart location in Woodbridge, Virginia, where hopefuls sat in folding chairs that snaked around several aisles, staffers said the waiting line had exceeded their inventory by 10 a.m. Monday." (CNN.com, 2005)

The two situations above, in turn raised the demand price of this item. Many consumers tried to buy their Xbox 360 online. Using websites such as Ebay.com, people tried to outbid each other in order to get one of these video game consoles as soon as possible. On the date of release, many of these bids ended at well over $1000. Researching the prices on www.ebay.com, on December 20, 2005, I ran a search for xbox360 which resulted in over 1050 items found. On the first