Gaming isn’t a cheap hobby at all. For the sake of reference, take the example of the graphics card. They are an integral component of a computer without which gaming isn’t possible at all. But these graphics cards come at a price; a very hefty price. Let’s take a bit of an economics class to understand why these simple GPUs are priced at extraordinarily high prices.
Increased Demand
While gaming was considered a taboo in society until a few years back and certain stigmas, such as gaming is only for kids, were attached to it, it has become a rapidly growing industry lately. The value of the video game industry is expected to reach the 200 billion USD mark by 2023. This increased demand for gaming has consequently raised the demand for graphic cards substantially. During COVID, the demand for gaming PCs increased even more since people were looking for ways to kill time during lockdowns subsequently the demand for GPUs increased.
But it’s not just games that require high-quality GPUs. The demand for graphics cards also comes from other professionals such as video and photo editors. Since platforms such as Lightroom and Premiere Pro need a high-quality graphics card to run efficiently.
The increased inclination towards cryptocurrency has also exponentially raised the demand for better GPUs since running crypto programs and crypto mining requires a heavy-duty graphics card.
Considering the constantly increasing demand for graphics cards, their price increase is justified. According to the basic principles of economics, when the demand for a good increase, its price is bound to increase. Under this notion, the hefty prices charged for graphics cards can be understood.
Evolving Technology
Video game developing giants are in the race for higher profits. One way to achieve their aim is to improve the graphics of their games. Activision, for instance, with its rollout of Call of Duty: Modern Warfare opened up a new chapter in the world of graphics.
To support these improved graphics. A better graphics card that has the capability to run these games without lag need to be rolled out. These GPUs need to have high-quality chips, compatibility with higher resolutions, and the ability to cool quickly and in a better manner. All of these pre-requisites of a good graphics card demand expensive components such as massive RAMs and highly efficient cooling systems (preferably liquid cooling systems). These elements that are required in the production of GPUs are very pricey and thus the producers transfer this high cost to their customers in form of high retail prices.
But that is not the only way the changing technology impacts the price. Producing a new GPU requires a lot of time, therefore their supply is quite low. If we refer this situation back to economics, we’ll realize that increased demand and a low supply are the basic reason behind increased prices.
Tariffs, Taxes, and Embargoes
Computer and gaming components are considered to be a luxury. Therefore are heavily taxed by governments around the world. Not only are the profits of producers taxed, but while importing the required components and then the final product high amounts of customs duties need to be paid. Such heavy taxation leaves no choice for producers but to cover their costs by setting incredibly high prices.
The prices of GPUs are even high in developing economies and this can be attributed to the government tax systems. The economic teams of developing countries are always in the search for luxury products which they can tax heavily to meet their tax targets. GPUs and computers, especially those which are particularly designed for gamers, are considered to be luxuries and thus are taxed.
Embargoes, or bans on imports from certain countries, have a similar effect on the price of graphic cards. For instance, certain parts are banned to be imported from relatively cheaper countries, therefore the cost of production increases and hence the higher price.
So, is there no way out?
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The Bottom Line
Hopefully, the prices of graphics cards will come down in the coming months as the demand for Gaming PCs decreases as workplaces have started to open up again. A shift in the economic policy of your country could also lead to a decrease in its price. But regardless of this, any substantial price fall should not be expected since the most important reason for the high price is the ever-changing technology; which will continue to progress at the same rate.
