[macintologist]

When the iMac came out in 1999 it cost $1299 and was only 0.23ghz with 32Mb of Ram.

Now 9 years later, the cost of a standard iMac is still in that range, $1199, and now they have bigger and thinner screens, much more RAM, hard drive space, faster processors, etc.

Why is this the case? Why haven't computers gone up in price with inflation?

[KisforKennedy]

They sell more, more often.

[design219]

That's kind of the way all technology goes, it will continue to get better and cheaper as more developers are involved.

[Chuckit]

Actually, the average cost of an iMac nowadays is about $400 more. You can't take the low-end model and call it "standard." If anything, I'd bet the mid-range model is the most popular.

Anyway, this isn't really a fair comparison. The two products in question are related only by name. It's like asking "Why aren't oranges nowadays a lot more expensive than apples were 10 years ago"?"

[Eug]

Back in the 1980s, a standard desktop was around CAD$3000. Nowadays, it's less than half that.

[mduell]

Costs go down, and there's enough competition to keep prices from staying the same.

[macintologist]

I just don't understand how with government printing money out of thin air, causing inflation, that technology prices would go down every year while the technology itself improves!

[vmarks]

Here's the thing: you can only charge what the market will bear.

Vendors wanted to sell more so they raced to the bottom of the sub-$1000 USD market, and then even to the sub-$500 market, and found that it wasn't really profitable even though they were selling more. Customers became accustomed to being able to buy at these kinds of prices and it affected the whole computer industry. Apple couldn't be seen costing as much as they once did, but had to have some machines near the PC price mark in order to seem accessible and break the "Macs cost more" myth.

Some vendors couldn't compete in the sub-$1000 space, and sold their businesses. IBM, for example. Compaq, for another. Whither Packard-Bell? It became eMachines which is now owned by Gateway, as the low dollar model (as if Gateway were a premium brand?)

As long as the costs of manufacturing, marketing, and distributing are cheaper than the price at the register, there's still a business. (Oversimplification, but it explains why you don't have to see the prices stay proportional or linear with inflation.)

[macintologist]

Would cheap labor overseas have something to do with keeping the costs down like they are?

[Gavin]

To some extent yes, low labor costs help.

Mostly the prices staying put have to do with constantly improving efficiencies.
We alter the process so the box uses less plastic with the same strength: lower cost. We find a way to lower the electricity used by the stamping machine: lower cost. We take 4 chips on the motherboard and engineer them all into one chip: lower cost. We stop using CRTs in favor of LCDs, less weight to ship: lower costs. We analyze sales so we can better predict how many units to send to each store: less stuff sitting in the warehouse: lower costs.

The high tech and electronics industries are doing this all the time. The cost lowering effects ripple through whole sectors of the economy.

Remember Inflation is patchy and lopsided. Commodities are more sensitive to demand than manufactured goods. There's only so much meat you can get out of a cow, so when more people want beef the price goes up. More people want USB connectors so the factory swings into high gear and the price actually goes down. The price of Milk and Oil may be going up while the price of Cordless drills and Plastic bottles are going down. The price of a medium drink is about the same as it was several years ago while the price of a burger went up.

[KisforKennedy]

Originally Posted by Gavin 

while the price of a burger went up.

McDonald's didn't have a 99 cent double cheeseburger a few years ago though....

[CharlesS]

Originally Posted by KisforKennedy 

McDonald's didn't have a 99 cent double cheeseburger a few years ago though....

Are you sure beef is really what's in those things though?

[MrForgetable]

Originally Posted by CharlesS 

Are you sure beef is really what's in those things though?

On a McDonalds bag I saw..

"Our Beef is 100% Beef!!!"

not that i believe them or anything, i just thought it was interesting.

[Dork.]

Semiconductor technology is moving so quickly that it is outpacing inflation. If you look at what type of chips you can buy at a given price point, the trend has been that you always get more capability over time. Inflation may decrease the buying power of money by 5% over a given year, but if the underlying technology improves by 30-50%, who cares?

Also, a given semiconductor have a relatively short, volume-driven lifespan. When a new part comes out, it is usually high-priced because not only is it the latest technology, but the vendor may not have gotten all the kinks out of the process yet, so the yields may be low.

As time goes on, yields get better (increasing supply), and since it's not the latest technology, demand tails off, making the price go down.

After a while, the price will sort of stabilize, but trend downward with time since the technology is getting older and less desirable. At a certain point, though, the chipmaker will find it unprofitable to keep making it, so they'll cut back to making very little (or even none) of that chip. Since supply is so constrained, the price can actually rise near the end of the chip's life. But the only people who would want it then are people who need that particular part for an old system, so demand is real low, too. (this is why sometimes the last technology's memory could cost more than the current technology's, for example).

For many semiconductors, this entire cycle (from cutting edge to mainstream to obsolete) takes place over just a few years, so inflation doesn't really factor into its value.

[Chuckit]

Originally Posted by MrForgetable 

On a McDonalds bag I saw..

"Our Beef is 100% Beef!!!"

"And it accounts for about 5% of what's in our burgers! Mmmm!"

[macintologist]

Thanks guys that was really interesting. And why is my reply box so small today?

[residentEvil]

it is because the "temporary" macnn employee is "fixing" things again.

[Suikolove]

Originally Posted by MrForgetable 

On a McDonalds bag I saw..

"Our Beef is 100% Beef!!!"

not that i believe them or anything, i just thought it was interesting.

"100% Real Beef" is the name of the company that McDonald's gets their meat from.

[Big Mac]

It's an interesting point to think about. We know that technology continues to improve, but it does not logically follow that improved technology should translate to lower costs. I think the biggest reason why is because there's so much competition -- and cutthroat competition at that -- among PC vendors. Apple isn't exactly exposed to the same pricing pressure as the PC box stuffers, but if Apple were to price Mactels far higher than Wintels there would be an obvious pricing mismatch for the same type of hardware that customers would less readily accept. However, Chuckit does point out that things aren't cheaper across the board. The entry level iMac isn't as well equipped, lacking a discrete GPU, than entry level iMacs of the past were. The mac mini is a bit more expensive than the G4 mini it replaced, and it lacks a discrete GPU. The MacBook is around the same price as it was but lacks a discrete GPU. (OTOH, it can be argued that the second core in those upgrades is a decent tradeoff.) And the Mac Pro starts at a more expensive price point than the G5 did. (To be fair, the G5 started at a more expensive price point than the G4 did.)