Price-to-performance ratio

In economics and engineering, the price–performance ratio 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, excluding other factors.

Price–performance is often written as cost–performance or cost–benefit. 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 to rank a product as having an increased price/performance.

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 medications (which are now affordable to the majority of AIDS sufferers), text-to-speech programs, and digital cameras. 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 netbooks, desktop computers, and laptop computers that also have been decreasing in price. However, the prevailing inflation rate 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 (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.

During the latter 1990s, the cost–performance ratios of the larger mainframe systems fell tremendously in comparison to a number of smaller microcomputers 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.

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