Unit 3 Micro: Economies of Scale and the Kinect

Here is an example of economies of scale in production. Microsoft’s motion-sensing camera the Kinect was one of the fastest-selling consumer electronics device in history when it was launched in November 2010. In a report on the FT’s technology blog, Dennis Durkin, Xbox chief financial officer, is quoted as saying that economies of scale have been the major factor driving down the unit price of Kinect from $30,000-$40,000 when it was under development two years ago to $150 now.

At this lower price point expect very strong demand from consumers but also increasing interest from businesses who might want to develop applications of the Kinect from helping surgeons in the operating theatre to the use of the device in car showrooms when selling vehicles. Kinect for Xbox 360 has now reached life-to-date sales of 10 million units.