Elasticity is a term for goods and services. If a good or service is elastic it means people will stop buying the item if the price is too high. Inelastic items are items people will continue to buy and tolerate higher than normal prices. Cigarettes, booze and gasoline are examples of inelastic goods people will still buy and tolerate higher prices, but it’s never for long.
They make money from the people buying the plex. To the point, the lower the price the more plex they must buy to afford what it is they want. Prices of other products in game are relatively stable by comparison and don’t fluctuate greatly.
Lower plex prices do, in fact make CCP more money for that exact reason. The number of people who buy plex is relatively limited and if they’re anything like their cellphone counterparts will buy at any time/price to obtain what they want so they don’t have to work in game towards that goal. They want that instant gratification. Sales do not influence these types of players, though sales will attract new buyers usually in the lower price point packages, which still would pale in comparison to numbers sold on a regular basis, it’s just a temporary spike. And again, actual “value” in game does not influence these purchases as much as the “deal” they are getting.
Not really. CCP have intervened in years past, to inject PLEX into the market, when inflation spiked for reasons they decided were worth counter-acting. CCP uses PLEX that was confiscated from banned accounts, when they intervene. I’m not so sure they will intervene in the current environment, because while inflation looks like a steep ramp these days, its not a spike-shaped ramp.
The price elasticity of demand is actually easier to understand than this…
e = %DQ/%DP
Where D is the change operator. So we can rewrite this as,
e*%DP = %DQ
That is the elasticity times the percentage change in the price tells you the percentage change in quantity. Suppose the price goes up by 10% and the elasticity is -.5 (i.e. the price elasticity of demand is inelastic) then the percentage change in quantity is -0.5*0.1 = 0.05 or a 5% decrease in the quantity demanded.
Now, what does this mean for PLEX? Depends on which market you are talking about. The supply function out-of-game is infinitely elastic. That is the supply function is given by the price. If we were to draw a supply and demand graph of the OOG market it would look something like this,
Why? Because the marginal cost (aka the supply curve) is essentially horizontal–i.e. CCP can make as many PLEX as they want at that price. They can satisfy any level of demand.
The demand curve on the other hand could be elastic or inelastic. And if linear it depends where the supply curve intersects with the demand curve (linear demand curves have an inelastic, unit elastic, and elastic regions).
All you ‘clever’ economists, who think, that higher price will increase supply: it does not work in PLEX market. Cause of players. Thee is only that much of them who sell plexes. Check the graphs - the higher price the lower is traided volume. Cause if you can buy 2 bilion PvP toy for 500 plex, why would you buy another 500 plex? In the past you needed to sell twice as many PLEXes to get the ISK you need.
The only thing CCP can do here apart from PLEX sailes (which always were just a temporary solution) is remove PLEX prices from any store. Skins, skill extractors, certificates etc must be sold for fixed price in ISK. PLEX can be used only to add game time and nothing else. That would force people to sell more PLEX for ISK instead of selling more ISK for PLEX…
Here is the core of the PLEX problem: number of players, willing to sell Plex stays the same. Cause it is not about game - it is about human lifestyle. If you use real money wallet to paddle your boat, you will keep doing it whatever PLEX price is. If you do not spend real money on game, that can be played for free (I do not talk about subscription payment), you will keep get your ISK from elsewhere, as before.