(While I was writing the following article, SolarCatacean had already explained the market mechanism perfectly. But let me post them because I made several charts and want someone to see them)
Seemingly it is time to open a class on microeconomics. In a free market, price is determined to balance demand and supply given the cost structure of the producers and the willingness to pay of the consumers. In a competitive market, a producer cannot sell their goods at higher prices because someone else will sell the same goods at a lower price.
figure1. Market mechanism
However, each model of headphones is somehow unique even though competition exists. Sennheiser cannot produce ADX5000, and AT does not sell HD800s. So the actual sale is a choice between "higher price, less quantity" or "lower price, more quantity." Each product faces a different demand curve. In this case, goods A is more popular with the consumers than goods B, so the producer can sell more A than B at any price point.
figure2. Demand curves
A "rationale" producer will maximize their profit (= sales - costs). In a simplified model, the cost consists of fixed and variable costs. Fixed costs consist of building, machinery, R&D, advertising, etc. Variable costs, which depend on the number of products, consist of material, labor, fuel, transport, etc.
figure3. Costs
We can add a line of sales to the above chart. The slope of the line is the unit price of the product. If the sales exceed the total costs, they have a positive profit. Thus if the quantity is more than the breakeven point, it is a "success" in a simplified business model.
figure 4. Profit and loss
Given the same cost structure, different price setting gives different breakeven points (q1 and q2). You should sell more goods if the price is lower to earn a profit, obviously.
figure5. Price strategy
So the question to the producer is the shape of the product's demand curve. If they think consumers' willingness to pay is high enough, they will choose a higher price to enjoy lots of profits by selling the quantity qs. However, if the actual demand curve is much lower, they cannot sell enough numbers to earn a profit (qw).
figure6. Weak or strong demand
In the case of YH-5000SE, already the price is shown. We, the consumers, give the demand curve and decide if YH-5000SE (and its price setting) is a success or failure in business. So far the demand looks high enough compared to the production capacity, but the final consequence is unknown until the end of the product's life.
P.S.1
Indeed I should say the above explanation of decision-making is too simplified. Yamaha produces many other products (unlike Meze or Final), and the headphones team mentioned they are considering expanding their product lineup. So they may put a higher price as a "statement" or a lower price because the R&D cost can be compensated by succeeding cheaper products, even if they lose some profit from YH-5000SE alone.
P.S.2
According to Yamaha's financial report, the profit ratio of the audio business is 1.6~10%. So I guess the profit margin is not much high. It can be a net loss easily because of the change of the business environment, such as inflation of energy, materials, and parts.
P.S.3
<For readers familiar with economics> I assumed constant marginal costs to simplify the explanation. In figures 3 - 6, profit and cost are the distance of the curves, not the areas surrounded by the curves.
P.S.4
Cost accounting is far more complex than the simple figure, and it needs experts to calculate the unit cost of a product precisely.
Seemingly it is time to open a class on microeconomics. In a free market, price is determined to balance demand and supply given the cost structure of the producers and the willingness to pay of the consumers. In a competitive market, a producer cannot sell their goods at higher prices because someone else will sell the same goods at a lower price.
figure1. Market mechanism
However, each model of headphones is somehow unique even though competition exists. Sennheiser cannot produce ADX5000, and AT does not sell HD800s. So the actual sale is a choice between "higher price, less quantity" or "lower price, more quantity." Each product faces a different demand curve. In this case, goods A is more popular with the consumers than goods B, so the producer can sell more A than B at any price point.
figure2. Demand curves
A "rationale" producer will maximize their profit (= sales - costs). In a simplified model, the cost consists of fixed and variable costs. Fixed costs consist of building, machinery, R&D, advertising, etc. Variable costs, which depend on the number of products, consist of material, labor, fuel, transport, etc.
figure3. Costs
We can add a line of sales to the above chart. The slope of the line is the unit price of the product. If the sales exceed the total costs, they have a positive profit. Thus if the quantity is more than the breakeven point, it is a "success" in a simplified business model.
figure 4. Profit and loss
Given the same cost structure, different price setting gives different breakeven points (q1 and q2). You should sell more goods if the price is lower to earn a profit, obviously.
figure5. Price strategy
So the question to the producer is the shape of the product's demand curve. If they think consumers' willingness to pay is high enough, they will choose a higher price to enjoy lots of profits by selling the quantity qs. However, if the actual demand curve is much lower, they cannot sell enough numbers to earn a profit (qw).
figure6. Weak or strong demand
In the case of YH-5000SE, already the price is shown. We, the consumers, give the demand curve and decide if YH-5000SE (and its price setting) is a success or failure in business. So far the demand looks high enough compared to the production capacity, but the final consequence is unknown until the end of the product's life.
P.S.1
Indeed I should say the above explanation of decision-making is too simplified. Yamaha produces many other products (unlike Meze or Final), and the headphones team mentioned they are considering expanding their product lineup. So they may put a higher price as a "statement" or a lower price because the R&D cost can be compensated by succeeding cheaper products, even if they lose some profit from YH-5000SE alone.
P.S.2
According to Yamaha's financial report, the profit ratio of the audio business is 1.6~10%. So I guess the profit margin is not much high. It can be a net loss easily because of the change of the business environment, such as inflation of energy, materials, and parts.
P.S.3
<For readers familiar with economics> I assumed constant marginal costs to simplify the explanation. In figures 3 - 6, profit and cost are the distance of the curves, not the areas surrounded by the curves.
P.S.4
Cost accounting is far more complex than the simple figure, and it needs experts to calculate the unit cost of a product precisely.
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