Apple Inc. formerly Apple Computer, Inc., is an multinational corporation headquartered
in Cupertino, California, with a focus on designing, manufacturing, and selling consumer
electronics and computer software products (www.apple.com). Apple
Inc. was originally founded in 1976 as Apple Computer, Inc. but recently
changed its name to Apple Inc. in January of 2007 (www.apple.com).
Apple Inc. is consistently introducing new technology with an array of
electronic products available. Many of
their most recognizable products include the Macintosh desktops and portable
computers, Mac OS X operating systems, the iPod music
player, as well as the iTunes store, the iPhone smartphone, and additional
professional software applications (www.apple.com). From the articles and information, I have done some
analysis and evaluations. In my analysis, I have related the case to three
concepts which are concept of demand and supply and price elasticity of demand.
Demand and Supply in Apple Inc. Industry
Demand
is consumer's desire and willingness to pay a price for a specific good or
service (Bajada, C., John, J., Mclver, R and Wilson, E., 2012). The law of
demand states that the higher the price, the lower the quantity demanded. It is
result from substitution effect and income effect (Bajada, C., John, J., Mclver,
R and Wilson, E., 2012). In this concept, price
of the good and quantity demanded of the good have a close negative
relationship. When other factors remain the same, the higher the price of a
good, the lower the quantity demanded of the good. Conversely, the lower the
price of a good, the higher the quantity demanded of the good. All of the
changes of quantity demanded that made because of price itself will only cause
a movement along the demand curve. Demand curve is also a willingness-and-ability-to-pay curve.
The demand curve below show the relationship between price
and quantity demanded, the movement along the demand curve is cause by the
changes in price of the good itself.
There are numerous
factors which cause shifts in the demand for Apple's computers and digital
products. The company was able to gain a substantial increase for its products
in recent years by the introduction of new electrical device, such as iPhone
and iPod, which created a new market and increase the demand for Apple's newest
products.
There are
few determinants for the demand of Apple’s products such as consumer’s preferences and income (Bajada, C., John, J., Mclver, R and
Wilson, E., 2012). If the
consumer’s preferences on Apple’s products
increase, current demand for Apple’s products would increase even though the
current price is the same. On
the other hand, when income increases, consumer has the ability to purchase more
Apple’s products. Besides
that, the determinants such as consumer’s preferences and income factor would
make a shift in demand curve. In
reference to tastes and preference, Apple Inc., has the ability to get more
consumers to demand its product because of its array of advertising tools, such
as internet ads, magazine advertisement, and corporate sponsorship. Thus, Apple
Inc. has a high demand for its products in regards to its consumer tastes and
for its unique blend of products. Consumers
are willing to purchase Apple's personal computers and digital technology
because the products are known for its longevity.
The demand curve below has shown the demand curve
shift when there is an increase or decrease in demand.
Besides that, supply is the total amount of a specific good or service that is available to consumers (Bajada, C., John, J., Mclver, R and Wilson, E., 2012). The relationship between quantity supplies and price are shown in supply curve. When the price of cigarette is higher, BAT would supply more in market in order to earn more revenues. There is a positive relationship between price and quantity supplies (Bajada, C., John, J., Mclver, R and Wilson, E., 2012).
The supply curve below has shown the supply curve shift due to decrease and increase of supply.
Elasticity
of Demand for Apple Inc.
Let’s move to the concept of price elasticity of demand for
cigarette .Price elasticity of demand is a units-free measure of the
responsiveness of the quantity demanded of a good to a change in its price when
all other influences on buying plans remain the same (Bajada, C., John, J., Mclver,
R and Wilson, E., 2012).
Demand inelastic occurs when the percentage change in
quantity demanded is smaller than percentage change in price; elastic demand
occurs when percentage change in quantity demanded is greater than the
percentage change in price (Bajada, C., John, J., Mclver, R and Wilson, E.,
2012)
Apple’s iPhones, iPads. The Apple
brand is so strong that many consumers will pay a premium for apple products.
If the price rises for apple iPhone, many consumers will continue to buy. But
if it was a less well-known brand like Dell computers, you would expect demand
to be price elastic.
The iPhone’s elasticity in regard to consumer budget
again supports a rather moderate 4 percent elasticity. Unlike salt or pepper
brands, the iPhone consumes a relatively large portion of the average consumer
budget. Aspects such as a highly devoted consumer base, product hype, etc,
contributed to an inelastic demand, yet, lower prices of substitutes
counterbalance these factors.
Another specific reason for the iPhone’s increase of the elasticity of demand is consumer irritation; many consumers who aspire to buy an iPhone are slightly put off by the rather unusual fact that Apple restricted the iPhone to one exclusive carrier per country (generally, mobile manufactures provide the costumer with the possibility to unlock their phones and switch between different carriers). The transaction costs of switching between different carriers and the high price of the iPhone might dissuade first time buyers from making a purchase, increase the substitution effect and result in an increase in market-elasticity.
An element that reduces the market-elasticity of the iPhone is the fact that customers of Apple’s music download platform iTunes are dependent on the iPhone if they want to buy a device that includes a mobile phone and internet with music downloading capability. Why? Because, music downloaded from iTunes can only be played on Apple devices. Yet, consumers could also have substituted their needs with a combination of an iPod and a regular mobile and wait until increased competition reduces the price of the iPhone.
Overall, all these factors contribute to the predicted moderate branch-level elasticity of 4-5 per cents. I predict that elasticity, especially due to the substitution effect will increase significantly in the long-run the
According to the figures provided by Apple’s quarterly report alongside other calculations we predict an estimated elasticity of 4-5 percent. Generally speaking, a rather moderate branch-level elasticity. Several other factors support our conclusion; the iPhone is a trendy and desirable good with unique features and no direct substitute, factors usually found in inelastic products. Yet the high price of the iPhone (still one of the most expensive mobiles on the market after the price cut) and the fast response of competitors might counterbalance these factors. Furthermore, consumer irritation over Apple’s ‘one-carrier’ policy and mix of alternative products as a possible substitute increases the substitution effect and once again support our elasticity estimates. Furthermore we predict that competition due to direct substitutes will increase, resulting in a decrease of price, boosting elasticity for the iPhone.
Another specific reason for the iPhone’s increase of the elasticity of demand is consumer irritation; many consumers who aspire to buy an iPhone are slightly put off by the rather unusual fact that Apple restricted the iPhone to one exclusive carrier per country (generally, mobile manufactures provide the costumer with the possibility to unlock their phones and switch between different carriers). The transaction costs of switching between different carriers and the high price of the iPhone might dissuade first time buyers from making a purchase, increase the substitution effect and result in an increase in market-elasticity.
An element that reduces the market-elasticity of the iPhone is the fact that customers of Apple’s music download platform iTunes are dependent on the iPhone if they want to buy a device that includes a mobile phone and internet with music downloading capability. Why? Because, music downloaded from iTunes can only be played on Apple devices. Yet, consumers could also have substituted their needs with a combination of an iPod and a regular mobile and wait until increased competition reduces the price of the iPhone.
Overall, all these factors contribute to the predicted moderate branch-level elasticity of 4-5 per cents. I predict that elasticity, especially due to the substitution effect will increase significantly in the long-run the
According to the figures provided by Apple’s quarterly report alongside other calculations we predict an estimated elasticity of 4-5 percent. Generally speaking, a rather moderate branch-level elasticity. Several other factors support our conclusion; the iPhone is a trendy and desirable good with unique features and no direct substitute, factors usually found in inelastic products. Yet the high price of the iPhone (still one of the most expensive mobiles on the market after the price cut) and the fast response of competitors might counterbalance these factors. Furthermore, consumer irritation over Apple’s ‘one-carrier’ policy and mix of alternative products as a possible substitute increases the substitution effect and once again support our elasticity estimates. Furthermore we predict that competition due to direct substitutes will increase, resulting in a decrease of price, boosting elasticity for the iPhone.
In conclusion, demand & supply concept and price elasticity of demand
are relating closely with Apple’s Inc. industry. From the analysis above, we can confirm that consumers’
preferences and other determinations can affect its quantity demanded.
Since producers cannot control the other factors
of determination, they can make a change in consumers’ preferences.
Reference list:
Apple Inc., 2013. [Online] Available from:<www.apple.com> [Accessed on 7 June 2013]
Apple, Inc.: Company Supply, Demand and Financial Status. [Online] Available from:<http://voices.yahoo.com/apple-inc-company-supply-demand-financial-status-636114.html?cat=15> [Accessed on 8 June 2013]
Apple Inc., 2013. [Online] Available from:<www.apple.com> [Accessed on 7 June 2013]
Apple, Inc.: Company Supply, Demand and Financial Status. [Online] Available from:<http://voices.yahoo.com/apple-inc-company-supply-demand-financial-status-636114.html?cat=15> [Accessed on 8 June 2013]
Bajada, C., John, J.,
Mclver, R and Wilson, E. (2012) Economic Principals. Australia:
McGraw Hill
