Why are computer prices reducing even when computer functionality is increasing?

There are two main reasons.

The main reason is that more and more computers are being made; the quantity is going up. As more computer components are made, the costs of manufacturing go down, and the costs of research and development can be spread across a greater quantity of products. For example, if it cost $1000 to develop a product and only 5 of those product sold, the cost per product would be $200. If 20 of those products sold, the cost per product would only be $50.

The second reason is that things are being built to a poorer quality than they were 10 years ago. If a company can decrease the price of a computer, they will, even if it affects the quality of the computer.