Apples and Apple have different price changing directions

In general, we think our economy and markets are experiencing inflation; however, it is not necessarily true for all products. The prices of different kinds of food are experiencing some degree of inflation depending on which country you are living; however, the Apple products are experiencing decreases in their prices that once a new product is released, the previous version immediately experience a sharp cut in its price. What makes the prices of apples and Apple change so differently?

Although we usually say price is determined by the market via the demand and supply model, because IT companies tend to differentiate their products from other companies, each IT product market is not a perfectly competitive market, so the companies choose prices for their products that allow a certain number of customers to accept the prices and buy their products. Based on this point, the prices of Apple products depend on how much Apple thinks its customers value its products. Then what makes Apple’s customers value its products diminish over time, compared with apples?

Actually, the Apple products have some good reasons that their prices should not decrease over time, compared with apples. The Apple products can be stored much longer, having no effects on their functions. The Apple products have fewer substitutes than apples. The Apple products have stable performances over a relatively long period of time while apples have no utility any more once you have eaten them. However, the production factors of the two kinds of goods decisively determine the price change directions. The key productive factor of apples is the nature, without the sunlight, water and soil, apples cannot be planted. These are considered as stable or even diminishing factors. On the other side, the key productive factor of the Apple product is knowledge and technology, which are considered to be able to develop over time with no limits. When the new ideas come out, the old ones become much less useful and desirable, so the prices drop sharply. Moreover, when we have a technology boom, which could generate a rapid economic growth, the speed of the technology development accelerates the speed of the IT products’ devaluation while other goods markets seem to have relatively high inflation levels.

Therefore, although we always say that knowledge is priceless, in fact, the knowledge itself often devalues over time when we are always developing our technology and knowledge.