Presentation 13 (1)

Uneven Spike In


Graphics Card Market

(still in high demand)






Gaurav Gupta, DM-23111

MICROECONOMIC THEORY








Perfect competition is defined by five assumptions.





1. Market consists of many buyers.


2. The market consists of many sellers.

3. The firms that sell in the market are free to either enter or exit the market at


any time.

4. The goods sold by the sellers in the market are assumed to be homogeneous.


Note: In this case, it's a particular good at graphics cards, and we'll assume that


the multiple GPU variance and slight clock speed deviations are that there

homogenous .





5. Buyers and sellers in the market are assumed to have perfect information.


Note: This means that all resources and pricing strategies are known by all


buyers and sellers in the market. Now, obviously, the buyers in this market are us.

We are the consumers. We want the graphics cards.

It doesn't matter what we intend to use those graphics cards for could be gaming,

mining, content creation. The purpose of the purchase is irrelevant. The fact is, we
are in the market to purchase graphics cards when interest in Ether, spite that's the

popular online currency so many are mining nowadays. Ethereum graphics card

demand spiked in particular, RTX - 3090, 3080 Ti, 3070, 3060, 2070,2060, GTX - 1660,
1650, 1080, 1070, 1050.

































Pretty much every mid to high range graphics credit on the market. All skyrocketed and

demand older cards, including the GTX 1080, also flew off the dusty shelves of retired

PC gamers. So we the buyers created this bubble. Most of us understand the basic

supply demand structure as demand shifts to the right equilibrium price rises.

What essentially happens here?

What happened with the graphics card market was that the Perfect competition model was broken. Turned

upside down from our five rules. Rule number two was broken. Once the initial supply of graphics cards was
drained from Flipkart and Amazon warehouses, among other places, the market was no longer perfectly

competitive.

And if we assume Rule one was maintained, which we can and directly verify with the jump. And
secondhand, graphics card sales from sites like Ebay and Craigslist, what we're left with Is graphics card

market. At temporary disequilibrium, our Perfect model assumed that the market would quickly converge to a

single acceptable price for GTX 1080 and GTX 1660, 1650. That was somewhere in the low to mid two

hundreds when demand shifted that price increase, but the market was still in equilibrium, at least until
supply was dried up.







































Something else to mention, this is a shift in demand and not a slide along the original curve, since demand
increased for all prices when Ether & BitCoin mining interests spiked.

Case in point, I sold an old GTX 1660 on OLX for Rs.35,000. I purchased it at Amazon for Rs.18,000 only a few
months earlier. In Rudimentary, courses were taught that supply and demand curves are actually straight

lines. This, in fact, is not the case. They're called curves for a reason.










































At lower quantity, supply tends to be elastic, meaning that small changes in price will yield a greater
response in the quantity provided. But when demand curves shift as a result of sudden interest spikes

required, supplies shut into inelastic territory where small product quantity changes yield enormous price

disparities. This is because suppliers have difficult times scaling up production. Conversely, demand shifts

leftward need only four suppliers to stockpile inventory, not good in the long run, but slower to manifest from
a price perspective in the short run. As a result, we're left with an awkward supply demand plot.

By this point, you might be thinking this is some sort of market shortage, right? So suppliers like EVGA,

Gigabyte Asus, pretty much any graphic here, manufacturer or Re-Brander out there is short on supply. So the
reason why we have such high prices as because we don't have enough graphics cards in supply? Well, in a

free market with near perfect competition, the answer is a bit convoluted at first. Yes, a market shortage does

exist.



However, suppliers will quickly catch on to what's happening. They're in charge of inventory, after all, and

once they raise prices to this point, the market will once again be in equilibrium. That's right. What we
experienced earlier in 2019 was a market at equilibrium. There was no shortage here.




The market was perfectly stable where it was, and it still kind of is that way. It's capitalism at work, love it or
hate it. So in a nutshell, the market shortage occurred because prices were initially too low when the demand

skyrocketed. Now, this is not the fault of suppliers. If they had seen this coming months in advance, they

could have deployed pricing strategies to kind of alleviate that sharp spike in price.



Right? They could have driven down inventory levels slowly or driven them up by increasing or decreasing

price accordingly. In this case, I recommend they probably slowly, gradually increased graphics card prices to

a point where we were at an equilibrium lower than where we were when Avex cards were at their peak price.

It's just a particular pricing strategy which may have worked in the situation. It's kind of hard to even play
Captain Hindsight here because we aren't sure of all the variables involved.

One thing is for sure, though, raising prices in gradual steps early on would have given those with the most immediate

demand a reason to purchase a mid fears of rising, continuously rising prices. That is, leaving those on the fence at the
mercy of time. Those who see a new graphics card providing the most utility will purchase earlier on and spare themselves
from higher her prices later on. Capitalism is like Mother Nature, ruthless and all about survival of the fittest. In this

case, it's those who first saw the demand spike months in advance, mainly those who pump and dump online currencies.



So continuing with our economic analysis here, the market was at equilibrium once the prices became stable at around
what. Sometimes even more than that. Those variances and prices are all a function of demand versus supply. But the
market did have a fair value equilibrium ice where demand and supply curves intersected. So it was an equilibrium.



No matter what anyone says, there was no shortage. Market shortage. The amount of graphics cards in supply had nothing

to do with that shortage because prices were allowed to settle at a particular equilibrium. Now, the market shortage
definition involved some sort of price ceiling. So if the government stepped in and said, hey, we're not going to allow the
suppliers to raise graphics card prices, we're going to force them to keep the prices really low.



So if that had happened, demanded stayed really high. Supplies said really low. And the institution at hand said, Nope,

these are going to stay really low prices. We're going to stay around 35,000 and 50,000 Bucks for GTX 1660 super. Then we
would have had a market shortage because then graphics cards would have gone immediately out of supply and there
wouldn't have been any available for sale.



That is a market shortage we don't have that you can still buy an GTX 1660 super. It's got to pay a lot more for it. That's a

market at equilibrium. Believe it or not, similar things happen in the wake of natural disasters. When Hurricanes threaten US
coastlines, suppliers ramp up prices to compensate for the impact pending demand spike.