Absolutely matters.
Then how do you explain the increasing production of computers, and continued investment in producing computers, when prices fall more than 3% year after year? What have they figured out that you haven't yet?
Will Government Motors borrow money, build new plants and increase production if every car sells for 3% less next year. 3% less the next, 3% less the year after that?
Government Motors is a bad example as the company still has massive over capacity thanks to a government orchestrated 'bankruptcy' that protected the unions and screwed their investors/owners. But Ford is an example of a company that continued to make investments in raising productive capacity even as it brought down the price of cars to something nearly everyone could afford. Henry Ford got rich by reducing the price of a car, not increasing it.
Will people buy more cars or fewer, if they know the price will drop next year and the year after and the year after that?
More, because more people can afford them when the price drops, same as with computers: "A total of 500 million computers, from desktop PCs to laptops and smartphones, were shipped in 2009. The accountancy group Deloitte predicts that will rise to 1.1 billion in 2014... Sales of PCs are still expected to rise 15 per cent over last year."
Will their profitability increase or decrease in that scenario? Dividends increase or decrease? What about employee headcount? Employee salaries?
Last time I checked Apple is making a profit, and the price of products they've introduced as little as 2 years ago have fallen in half. Profits go to companies who make things people want at costs that are less than the prices they're willing to pay. Besides, a nominal reduction in dividends or salaries doesn't matter if purchasing power of money is increasing. Right now we have stagnating wages and rising prices with central planners trying to set interest rates.
Employee headcount may well decrease as more capital equipment is introduced. But this is a misguided concern. This is how labor is freed up to be applied to entirely new lines of production by entrepreneurs. If 90% of the country was still on the farm we wouldn't have enough people left over to provide the plethora of goods and services we enjoy today. This is the natural course of free market economies.
A monetary environment that doesn't punish savings, that doesn't encourage debt for consumption, and that rewards savers with increased purchasing power leads to more capital accumulation, increased capital investment, and rising standards of living.
You have one example where improvements in technology have led to lower prices on older technology.
Government Motors is a bad example
Fine, start Gunslingr Motors.
Borrow a few billion to build a new factory. Now run your financial projections with your revenue declining 3% each year.
Say your profit is $3000 on each $20000 auto. Next year your cars sell for $19400. The next, $18818. Then $18253. Then $17706.
What's your profit margin per unit now?
But Ford is an example of a company that continued to make investments in raising productive capacity even as it brought down the price of cars to something nearly everyone could afford.
You're confusing price drops from increased productivity with price drops due to deflation. Did his sales increase during the Great Depression?
More, because more people can afford them when the price drops, same as with computers:
Same as with houses.
Besides, a nominal reduction in dividends or salaries doesn't matter if purchasing power of money is increasing.
The nominal reduction won't help you pay off your existing debt, will it? Try not to crush the existing debtors and kill their banks while you're encouraging savers. There appear to be more debtors and they seem to be involved in a lot of the production in the country.
A monetary environment that doesn't punish savings, that doesn't encourage debt for consumption, and that rewards savers with increased purchasing power leads to more capital accumulation, increased capital investment, and rising standards of living.
A monetary system that punishes investment in new production, hurts producers that use debt and encourages the hoarding of cash leads to rising unemployment and falling standards of living.