Final Project Part I: Milestone One: Supply, Demand, and Market Equilibrium

Final Project Part I Milestone One: Supply, Demand, and Market Equilibrium

MBA 502- Economics for Business

Elasticity of demand refers to how much demand for a good or service will change based on changes to supply and price. Apple has recently released the iPhone 6s. Sales were amazing after the release of the new device. However, the elasticity demand could have been distorted by many factors. Certain factors that could’ve affected the elasticity demand could have been lack of product differentiation by customers who purchased iPhones before, customer contract constraints, lack of US carrier subsidies, etc.

A company that wants to market effectively considers the nonprice factors affecting demand is an important part of devising a marketing and promotion strategy. Nonprice factors vary depending on many influences. These factors could be market influences, climates, and preferences and may change at any given point in a product’s life span. (Mpellsolutions) There are many nonprice factors that impact the demand of Apple products. As a loyal customer of Apple, I can say with confidence that I trust their products more than competitors. This is due to one of their nonprice factors, their branding. Apple’s branding is spectacular. They use advertising, product differentiation, product quality, customer service and strong branding images that buyers have a strong preference for their goods. Apple uses the Apple brand to compete across several highly competitive markets. Apple brand has evolved as it has expanded its wide range of products and services. Apple has a branding strategy that focuses on the emotions. The starting point is how an Apple product experience makes you feel. The Apple brand personality is about lifestyle; imagination; liberty regained; innovation; passion; hopes, dreams and aspirations; and power-to-the-people through technology. (Marketing minds) Another nonprice factor that impacts the demand of Apple products would be market size. Apple products range from cell phones, computers, watches all the way to the Apple TV. Since the market is expanding rapidly, customers are compelled to purchase based on other factors simply because the supply of goods is not keeping up with demand. For example, with Apple releasing Apple TV, one has no use of buying standard cable packages anymore. One subscription is good enough to use Apple TV. Not many competitors can keep up with the many various products and services that Apple provides; making the demand for Apple products much higher. Supply levels are determined by price, which increases or decreases supply along the price curves and nonprice curves which shifts the entire curve. (Boundless) A nonprice factor that could impact Apple is expectations. Apple’s expectations concerning future market conditions can directly affect supply. For example, releasing an iPod shuffle in this market would be unnecessary. IPhones have the same capabilities as an iPod shuffle. Another nonprice factor that could impact Apple is conditions of production. If there is a technological advancement related to the production of the good, the supply increases.

The industry that Apple falls under would be IT. They are a computer hardware and software, and consumer electronics company. Market equilibrium can be defined as a market state where the supply in the market is equal to the demand in the market. The equilibrium prices are the price the price of a good or service when the supply of it is equal to the demand for it in the market. Our text defines market equilibrium as the price that clears the market, at which quantity demanded equals quantity supplied. In 2012, Apple released the iPhone 5. About 600 customers queued up the day before to release to get the phone. Customers were limited to a maximum of two phones only. When the quality demand of the phone exceeds the quantity supply, shortage will occur. This will cause the price of the iPhone 5 to increase in order to meet the standard market equilibrium. If the price of the phone increases, the quantity demand will decrease. The quantity demanded and supplied will move upwards along the line to meet market equilibrium. I would make the decision to keep the price of iPhone the same as the lucrative quarters as to keep demand high.

References:

“Apple’s Branding Strategy.” Marketing Minds. N.p., n.d. Web. 10 June 2016.

“Economics Era.” : Market Equilibrium. N.p., n.d. Web. 10 June 2016.

“Elasticity of Demand: Substitution Effects.” HourlyNerd. N.p., 2014. Web. 10 June 2016.

Miller, Roger LeRoy., and Roger LeRoy. Miller. Econ 1B: Microeconomics. N.p.: n.p., n.d. Print.

“What Are the Non-price Determinants Of demand? – Questions & Answers – AccountingTools.” What Are the Non-price Determinants Of demand? – Questions & Answers – AccountingTools. N.p., n.d. Web. 10 June 2016.