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In economics,
engineering Engineering is the use of scientific principles to design and build machines, structures, and other items, including bridges, tunnels, roads, vehicles, and buildings. The discipline of engineering encompasses a broad range of more speciali ...
,
business management Business administration, also known as business management, is the administration of a commercial enterprise. It includes all aspects of overseeing and supervising the business operations of an organization. From the point of view of management ...
and
marketing Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to empha ...
the price–performance ratio is often written as cost–performance, cost–benefit or capability/price (C/P), refers to a product's ability to deliver performance, of any sort, for its price. Generally speaking, products with a lower price/performance ratio are more desirable on
demand curve In economics, a demand curve is a graph depicting the relationship between the price of a certain commodity (the ''y''-axis) and the quantity of that commodity that is demanded at that price (the ''x''-axis). Demand curves can be used either for ...
, excluding other factors. Even though this term would seem to be a straightforward ratio, when price performance is improved, better, or increased, it actually refers to the performance divided by the price, in other words exactly the opposite ratio (i.e. an inverse ratio) to rank a product as having an increased price/performance.


Background of appearance

Due to the prolonged low growth and economic slump, the proportion of consumption to income will inevitably decrease. However, they cannot completely give up their consumption, so they have found ways to maintain a similar level of consumption at a minimum cost.


Examples


Consumer and medical products

According to futurist Raymond Kurzweil, products start out as highly ineffective and highly expensive. Gradually, products become more effective and cheaper until they are highly effective and almost free to buy. Some of the products that have followed this example include
AIDS Human immunodeficiency virus infection and acquired immunodeficiency syndrome (HIV/AIDS) is a spectrum of conditions caused by infection with the human immunodeficiency virus (HIV), a retrovirus. Following initial infection an individual ...
medications (which are now affordable to the majority of AIDS sufferers),
text-to-speech Speech synthesis is the artificial production of human speech. A computer system used for this purpose is called a speech synthesizer, and can be implemented in software or hardware products. A text-to-speech (TTS) system converts normal languag ...
programs, and
digital camera A digital camera is a camera that captures photographs in digital memory. Most cameras produced today are digital, largely replacing those that capture images on photographic film. Digital cameras are now widely incorporated into mobile devices ...
s. However, products that rely primarily on paper (e.g., newspapers and toilet paper) and/or fossil fuels (e.g., electricity in most countries and petroleum gasoline for automobiles) have only increased in price. This directly contradicts the trend of electronic gadgets like
netbook Netbook was a commonly used term that identified a product class of small and inexpensive laptops which were sold from 2007 to around 2013. These machines were designed primarily as cost-effective tools for consumers to access the Inte ...
s,
desktop computer A desktop computer (often abbreviated desktop) is a personal computer designed for regular use at a single location on or near a desk due to its size and power requirements. The most common configuration has a case that houses the power supply ...
s, and
laptop A laptop, laptop computer, or notebook computer is a small, portable personal computer (PC) with a screen and alphanumeric keyboard. Laptops typically have a Flip (form), clam shell Form factor (design), form factor with the computer scr ...
computers that also have been decreasing in price. However, the prevailing
inflation rate In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
of a country or province/state may negate the plummeting costs of software, AIDS medications, and/or digital cameras in certain regions along with certain governmental policies. This has the effect of keeping costs high in certain areas while they are dramatically reduced in others. In theory, this means that the rich people have earlier access to highly inefficient technologies, medical treatments, and
therapies A therapy or medical treatment (often abbreviated tx, Tx, or Tx) is the attempted remediation of a health problem, usually following a medical diagnosis. As a rule, each therapy has indications and contraindications. There are many differen ...
(that are prototypical in nature) while the poor get access to these same products when they become more efficient and easier to manufacture several years down the road.


Business world

During the latter 1990s, the cost–performance ratios of the larger
mainframe A mainframe computer, informally called a mainframe or big iron, is a computer used primarily by large organizations for critical applications like bulk data processing for tasks such as censuses, industry and consumer statistics, enterprise ...
systems fell tremendously in comparison to a number of smaller
microcomputer A microcomputer is a small, relatively inexpensive computer having a central processing unit (CPU) made out of a microprocessor. The computer also includes memory and input/output (I/O) circuitry together mounted on a printed circuit board ( ...
s handling the same load. As a result, many of the older computer companies were shut down and people were put out of work. However, most of them were able to be re-hired at the newer corporations after undergoing a series of re-training involving the newer technologies. In the business world, there is usually a value associated with a typical cost–performance ratio analysis. This value can either be positive, neutral, or negative depending on the amount of money spent versus the results achieved by the spending of the available
capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used fo ...
. A cost-performance ratio with a positive value (i.e. greater than 1) indicates that costs are running under budget. A negative value (i.e. less than 1) indicates that costs are running over budget. However, a neutral cost-performance ratio (between 1.0 and 1.9) could suggest a certain degree of stagnation in the budget.
Business trip Business travel is travel undertaken for work or business purposes, as opposed to other types of travel, such as for leisure purposes or regularly commuting between one's home and workplace. According to a survey, 88% small business owners e ...
s can also be factored into the cost–performance ratio because spending $50 to do a journey spanning in two hours is a better cost–performance ratio than spending $105 to do the journey in one hour.


Computer technology

The term tends to be used quite a bit when comparing computer hardware. During the latter 1990s, the price–performance ratios of midrange and large
mainframe A mainframe computer, informally called a mainframe or big iron, is a computer used primarily by large organizations for critical applications like bulk data processing for tasks such as censuses, industry and consumer statistics, enterprise ...
systems fell tremendously in comparison to a number of smaller
microcomputer A microcomputer is a small, relatively inexpensive computer having a central processing unit (CPU) made out of a microprocessor. The computer also includes memory and input/output (I/O) circuitry together mounted on a printed circuit board ( ...
s handling the same load. Many companies were forced out of the industry as this happened, including DEC,
Data General Data General Corporation was one of the first minicomputer firms of the late 1960s. Three of the four founders were former employees of Digital Equipment Corporation (DEC). Their first product, 1969's Data General Nova, was a 16-bit minicomputer ...
and many
multiprocessor Multiprocessing is the use of two or more central processing units (CPUs) within a single computer system. The term also refers to the ability of a system to support more than one processor or the ability to allocate tasks between them. There ar ...
vendors such as
Sequent Computer Systems Sequent Computer Systems was a computer company that designed and manufactured multiprocessing computer systems. They were among the pioneers in high-performance symmetric multiprocessing (SMP) open systems, innovating in both hardware (e.g., ca ...
and Pyramid Technology.


See also

*
Benefit–cost ratio A benefit–cost ratio (BCR) is an indicator, used in cost–benefit analysis, that attempts to summarize the overall value for money of a project or proposal. A BCR is the ratio of the benefits of a project or proposal, expressed in monetary terms, ...


References

{{DEFAULTSORT:Price Performance Ratio Production economics Engineering ratios