Price Elasticity and Iphone

¶ … Apple Inc. Supply and Demand Apple is a U.S. multinational company that specializes in manufacturing and marketing of electronic products. Top Apple brands include iPhone, iPod, Apple Computer, and iPad. Globally, Apple is ranked as the second largest global electronic company with over $215.6 Billion revenue at the end of the 2016 fiscal year. Apart from the company superior financial performances, Apple has enjoyed high demand for its products globally based on the stylish method employed in designing the products.

The iPhone is one of the major products of Apple Inc., and the company has recorded superior demand for the product since the product has been launched. The objective of the paper is to investigate the supply and demand for the iPhone. Supply and Demand for iPhone The theory of supply and demand illustrates the quantity demanded versus the quantity supplied in the market. (Mankiw, 2007). The study discusses the supply and demand for iPhone which is one of Apple's major products.

The study explores the law of demand and supply for the iPhone, and its elasticity of demand. Demand and Supply: The law of demand illustrates the quantity of a product demanded in a given market. Apples operate in a global market and iPhone 7 is one of the latest products that the company has released. Since the company has released the product, the demand for the product outstrips the supply.

However, the law of demand and supply argues that the supply must equal to the demand for the market to reach the equilibrium. In the case of iPhone 7, Apple is unable to meet the demand for its product at its retail and online stores around the world. Fig 1: Supply and Demand of iPhone As being revealed in Fig 1, the Point A is where the market has reached its equilibrium. When demand is higher than the product supplied, there is a shortage in the market.

However, when there is short of iPhone in the official market, the black market will increase their price creating another equilibrium price. When the iPhone 5 was sold in China, the black market started selling the same product at an unreasonable high price. Trends in Demand and Their impact on the Firm and Industry Apple has enjoyed an increase in the demand for the iPhone for the past 10 years between 2007 and 2016. In 2007, Apple recorded sales of 270,000 iPhone however, the sales increased to over 74 million units in 2016.

In the first quarter of 2017, the sales of the iPhone has increased to 78 million units. An increase in the sales of the iPhone has led to an increase in the demand for smartphone globally (Statista, 2017) because consumers who cannot afford to buy the iPhone demand for another model of smartphone leading to an increase in the demand for the smartphone. Moreover, a high demand for the iPhone makes Apple record an increase in the net profits year by year. Recommendation for the Firm Apple Inc.

needs to prepare for the production of a new brand of iPhone since it is realized that consumers have formed the habit of demanding for the product every time the company releases a new brand. Thus, Apple should estimate the historical demand for the product, and produce the total number that will meet the demand. The strategy will make the supply and demand reaching the equilibrium and eliminate the black market for the iPhone.

Price Elasticity of Demand for iPhone A price elasticity of demand measures the relationship between a change in demand and change in the price. (Mankiw, 2007). The price elasticity of demand measures price sensitivity for quantity demand. The price elasticity for the iPhone depends on the market location where the product is being sold. In the United States, the demand for the iPhone is considered inelastic because a change in the price of the iPhone will not affect the demand for the iPhone.

The fig 2 shows that an increase in price will lead to a small change in demand. Typically, the standard of living of people in the United States is relatively higher than the standard of living of people in many other countries of the world. While the iPhone is a luxury phone, nevertheless, people in the United States will be able to afford to buy it.

However, the demand for the iPhone is elastic in the countries such as Thailand and Philippines where per capita income of people in these countries is lower. Thus, a demand for the iPhone will be elastic if there is a slight increase in the price.