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Apple & iPhone

A look at supply and demand with a focus on the recent smartphone launch
by

Michael VanSickle

on 11 November 2013

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Transcript of Apple & iPhone

Apple
Market Structure for Smartphones
Oligopoly
- A few large firms dominate the market
- Legal barriers prevent the entry of new firms
- Main obstacle: large amount of capital investment needed
Apple's Position
Specific customers;
Mid-high level of income
Innovative and revolutionary
High end jobs and lifestyles
Apple's Strategy
Strong branding due to;
Innovative product
Great quality
Unique design
Higher prices
Factors Affecting the Supply of iPhones
Price of materials
Transportation costs
Price of competition
Advances in technology
Quantity of phones supplied
Potential externalities
How Would an Increase in Supply & Demand Affect iPhone Equilibrium Quantity and Price?
Equilibrium quantity will increase
Equilibrium price is less certain
Cross elasticity of demand determines shifts in the demand curve
If There is a Shortage of iPhones, How Does the Market Return to Equilibrium?
The 5S is a good example of this:
Launched in late September, currently in short supply
Demand curve shifts to the right while the price stays the same, causing the shortage
In the short run; a substitution effect occurs
In the long run, supply and demand will return to equilibrium
iPhone Shortage
BACKGROUND
Founded on April 1, 1976

Known for its product line of Mac, MacBook, iPod, iPad & iPhone


Also the available consumer software including OS X and iOS operating systems, iTunes and Safari
Latest iPhone Versions (5S and 5C):
Launched on September 20, 2014
Nine million devices sold within the first 3 days
Priced at $719 and $599 respectively (without a contract)
Factors Affecting the Demand for iPhones
Competition (unique but related good)
An expected decrease in price
Specific features
Target market
Consumer income
What Factors can Change the Quantity of iPhones Demanded?
Consumer income:
The price for an iPhone is increasing while consumer income remains stable
Competition:
The cost for an iPhone is increasing; consumers may choose to purchase a different smartphone
Oligopoly; the smartphone industry is controlled by a few companies
Competition; Apple attempts to be one step ahead
Profit; relatively cheap production and material costs linked with a high selling price
Shortage; no iPhone, no problem. Low supply increases demand while prices remain stable
Innovative and hip; strong branding = iPhone's success
Summary
A look at supply and demand with a focus on the recently successful smartphone launch
What Factors can Change the Quantity of iPhones Supplied?
Price:
The only factor; price is affected by a change in demand
The result is a movement along the supply curve
What Factors Can Change The Demand For iPhones?


QUESTION #1

Competition (unique but related good)
An expected decrease in price
Specific features
Target market
Consumer income

Price of materials
Transportation costs
Price of competition
Advances in technology
Quantity of phones supplied
Potential externalities

QUESTION #2

Equilibrium quantity will increase
Equilibrium price is less certain:
If demand increases more than the magnitude of increasing in supply, the equilibrium price will rise.
If the supply increases more than the magnitude of increasing in demand, the equilibrium price will fall.

QUESTION #3

What Is Market Structure For Smartphones?


QUESTIONS #4

What Factors Can Influence The Supply Of iPhones?
How Would An Increase In Supply & Demand Affect iPhone Equilibrium Quantity And Equilibrium Price?
Oligopoly
Full transcript