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Does Apple Pursue The Law Of Supply And Demand?

563 Words3 Pages

As stated by Mankiw & Taylor (2014) the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance is called the law of supply and demand. More specifically when quantity demanded exceeds quantity supplied there is a shortage of goods in the market. This results in an increase price such that quantity demanded equals quantity supplied. The new quantity demanded is lower and the new quantity supplied is higher compared to the original ones. However when quantity supplied exceeds quantity demanded there is a surplus and the effects on price, supply and demand are the opposite.
In the market for smartphones more than 70% of shares are owned by only ten firms biggest of which are …show more content…

The price staid roughly the same over the course of three quarters of a year. The demand at the given price declined over this period. In order to not generate surplus Apple started decreasing the price. The most significant drop happened when the next version of the iPhone was announced. At this price Apple attracted a new group of customers to buy soon to be the old generation iPhone. As newer and newer versions were announced the value of the iPhone 3GS decreased. To match up the demand Apple repeatedly reduced the price eventually discontinuing the production. The end of production may happen as early as the announcement of the second next generation as we observe in the case of the iPhone 3G. The events of reducing price occur similarly in every new …show more content…

They are determined by numerous factors including the law of supply and demand. Since Apple is aware of these factors they are able to set and change their prices accordingly thus gaining higher revenue.

References
Ahonen, T. (2014). Communities Dominate Brands: Smartphone Top 10 for Q2 of 2014, same ole same ole... [online] Communities-dominate.blogs.com. Available at: http://communities-dominate.blogs.com/brands/2014/08/smartphone-top-10-for-q2-of-2014-same-ole-same-ole.html [Accessed 13 Nov. 2014].
Dediu, H. and Dediu, H. (2013). How will iPhones 5S and 5C be priced?. [online] Asymco. Available at: http://www.asymco.com/2013/08/12/how-will-iphones-5s-and-5c-be-priced/ [Accessed 13 Nov. 2014].
Dediu, H. and Dediu, H. (2012). Samsung's basis of competition. [online] Asymco. Available at: http://www.asymco.com/2012/08/10/samsungs-basis-of-competition/ [Accessed 13 Nov. 2014].
Ismashphone.com, (2014). Infographic: iPhone Announcement vs iPhone Release Dates (iPhone 5 Rumor Factory) | iSmashPhone. [online] Available at: http://ismashphone.com/2011/03/timeline-wwdc-keynote-vs-iphone-release-dates-iphone5.html [Accessed 13 Nov.

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