Apple Inc

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.

     

 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]

Bajada, C., John, J., Mclver, R and Wilson, E. (2012) Economic Principals. Australia: McGraw Hill