Carroll, P. B. "Hurt By A Pricing War, IBM Plans Write Off and Cut of 10,000 Jobs." The Wall Street Journal, 6 December 1989, A1, A8.
This research critiques the above referenced article in the context of economic theory related to the market process. The market process is a method of economic organization which permits unregulated prices, and decentralized decision making by participants in the market to resolve basic economic prob lems associated with consumption, production, and distribution.
I think that the referenced article is relevant to the market process because it describes the response by IBM to significant events in the computer market. One of the tools of the market process is price. The referenced article describes how IBM responded with revisions in its pricing policy to both shrinking market share, and to the pricing policies of competi tors.
A price system is a process of resource allocation in an economy. The Ameican economy is, in general terms, a free mar ket economy. In a free market economy, prices are determined in the market, without government intervention for the most part. One of the theoretical economic concepts associated with the use of prices is that of economic efficiency. Economic efficiency demands that any given output be produced at minimum cost. To produce goods at minimum cost means that both waste and technological inefficiency must be avoided. Prices are
used to find the cost minimizing production processes. Another theoretical concept associated with the use of prices in a free market economy equilibrium. A free market economy is said to be in equilibrium when the independently taken decisions of households and firms are compatible. To achieve this equili brium, prices must be set at a level such that the total demand for any good is equal to the amount of it initially available, plus the amount of it produced. Implicit in the concept of equilibrium is anoth...