The demand curve for Apple and Android are as follows. Note demand is still high for the iPhone in terms of number of customers, but it is losing ground to Android as the latter brings its average price down. The future of the iPhone is a little bit less certain. The product has a much higher market share in wealthy markets than it does in emerging markets, because the company has focused more marketing and there is better capacity to purchase. However, the pace of innovation has slowed and as the industry matures Apple is also facing a situation where it must make a pricing decision again. The market is moving to oligopoly again, despite the persistent presence of Blackberry and Microsoft as bit players in the market. In an oligopoly, companies are more responsive to the moves of one another, including pricing moves. Apple will compete more directly against the low priced-OEM Android products, but also against multiple providers of high-end devices, who in combination can out-innovate Apple. At least Samsung has also been able to build its brand reputation as well, but more importantly Android has a...

Going forward, Apple is going to come under increasing price pressure as the pace of innovation in the industry continues to slow. What should the company's response be? Should it continue with high prices even though it can afford to cut them? Should it lower prices in response to the changing industry conditions? What will the increased supply of low-end smartphones ultimately mean for high-end players like Apple?
Works Cited:

Beggs, J. (2013). Absolute and comparative advantage. About.com. Retrieved April 23, 2013 from http://economics.about.com/od/Gains-From-Trade/ss/Absolute-and-Comparative-Advantage.htm

Investopedia. (2013). Monopolistic competition. Investopedia. Retrieved April 23, 2013 from http://www.investopedia.com/exam-guide/cfa-level-1/microeconomics/monopolistic-competition.asp

Thierer, a. (2011). How iPhones and Android ushered in a smartphone pricing revolution. Forbes. Retrieved April 23, 2013 from http://www.forbes.com/sites/adamthierer/2011/07/10/how-iphones-and-androids-ushered-in-a-smartphone-pricing-revolution-2/