The video enhancement market is relatively new in the United Statesoffering commercial

products only since around 1998. Video enhancement products are state-of-the-art graphics systems that capture, analyze, enhance, and edit all major video formats without altering underlyingfootage. In1998,thismarketconsistedofasmallnumberofcompanieswho extended their primary business of broadcast video production systems to include video enhancement products. Demand was relatively light due to the extremely high price of the

and the lack of technology and the lack of product awareness with prices ranging between $45,000 and $80,000.

In 2000, Intergraph entered the market at a price of $25,000, attempting to quickly capture a major share of the market. Intergraph produced a product at a substantially lower cost than the competition. This entry caused an increase in supply and a strong downward pressure on price, dropping average pricing to around $40,000. Please explain this event in graphical form.

This hostile environment led to a number of firms exiting and prices rising back to around $45,000. Please explain this event in graphical form.

The events of 9/11/01 had a further dramatic effect on the supply and demand of video enhancement services. Concern over terrorist activities caused demand to spike. Videotapes from airports, border crossings, convenience stores, parking lots, and the like became much more important. Soon there were more tapes needing analysis than there were people or machines available, and price was no longer a critical issue. In the short run, average pricing shot up. These higher prices attracted more companies to the market thereby increasing supply, and drove pricing back down to an average level of around $30,000.Please explain this event in graphical form.