Computers better and cheaper

28/04/2009 15:00

Consumer goods and services cost on average 30 percent more in 2008 than in 1996. Not all goods cost more than twelve years ago, however. Computer equipment was no less than 92 percent cheaper in 2008 than in 1996. Computers now cost less than 10 percent of what they cost in 1996, and prices of TVs, DVD players and recorders, telephones, and photo and video cameras fell by more than 70 percent. Audio-equipment now costs 41 percent less.

At the same time the technological capacity of computers and other consumer electronics has advanced substantially. Computers now do more for the same price. This makes it more difficult to compare prices directly. When comparing prices in time, Statistics Netherlands assumes that the quality of products remains unchanged. A quality improvement is seen as a price reduction.

In 2004, for example, a popular PC with a Pentium 4 processor sold for 1,000 euro. Five years later this PC is no longer available and a popular PC with a Core2Duo processor, for example, costs 600 euro. The (nominal) price decrease is 40 percent. However, the new product performs one and a half times better than the previous one. A correction is made for this quality improvement. This means the ‘real’ price reduction may come to as much as 60 percent.

Prices of consumer electronics, 1996-2008

Prices of consumer electronics, 1996-2008

Stefan Boumans