April 15, 2009

The Cost of Computers over Time

The Bureau of Labor Statistics tracks consumer price data. Computer equipment is one of the price categories that they track. Below is the trend in the price index of "personal computer and peripheral equipment" for the past 10 years

As you can see the price of computers has dropped drastically over the years. From 1999 to 2003 the index dropped over 20% every year. Lately the rate of price drop has slowed but the prices for computers are still dropping. The index has decreased at a rate of 11-12% annually for the last 3 years.

Remember this is an index of prices so its not directly related to a specific dollar amount for a specific item. They are looking at personal computers and peripheral equipment prices as a whole so its a combination of everything in that category: very expensive computers, cheap computers, monitors, printers, etc. So while the overall prices may have gone down from a 700 level to 100 level that doesn't mean that any individual computer part you buy today will cost 1/7th of what it cost 10 years ago. For example the cheapest Dell system today costs about $400 but the cheapest Dell 10 years ago was not 7 times that much.

Overall this kind of price trend does matches reality pretty well. I remember in the late 1980's that an IBM PC would cost in the ballpark of $3000. I remember spending about $1500 for my first real PC back around 1994. Today you can buy a decent Dell system for around $400. A printer today can be bought for as little as $25-$50 on sale but 10 years ago they'd easily run $150-$200 minimum.

From the index and from direct observation, its clear that personal computer prices have been steadily decreasing over the past decade.

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