rt two conflicting influences on total revenue. First, total revenue will rise because of an increase in the number of units sold. However, revenue losses from the lower price on units that could have been sold at a higher price will at least partially offset the additional revenue form increased sales. Therefore, the marginal revenue curve will lie inside the firm's demand curve. Although there are continuous price cuts on computers, the demand for PCs in the workplace will remain fairly consistent however, the demand for PCs in the home will increase as the unit price decreases. Since the home market account for less then twenty percent of total computer sales world wide, it shows very little affect on the demand curve. The market appears to be only slightly elastic because the price is decreasing and the demand curve is barely affected. Virtually every corporate employee has a PC. Most companies will hold to that policy despite drastic price drops. However, as the total cost of owner ship decreases with the purchase price and the rapidly changing technology, the expected life of a PC is shortened. This will show an increase in unit sales over a three-year period but that curve would only be a forecast. The Year 2000 Bug (Y2K) has caused a lot of activity in the IT market. I use the word activity because the increase in corporate IT budgets and IT sales and service is short term and should not be used to determine the growth rate of the industry. However because there is a low barrier to entry, new rivals are drawing customers away from established firms. These new companies are forcing the demand curve to shift inward, thus minimizing and in some cases eliminating profit. When the Y2K activity dissipates, many of the smaller firms will go out of business or will be acquired by larger firms. Acquisition is the most popular and efficient way to grow an IT firm right now. It enables the firm to procure qualified engineers and technology...
