Demand and Market Equilibrium of Apple iPhone: A Study

This study focuses on the demand and market equilibrium of Apple iPhone. It discusses the oligopolistic market, demand curve, pricing policy, demand substitution, and more. The study also provides information about the iPhone's substitutes, complements, consumer income, taste and preference, and expectations of price. It concludes that the demand for iPhone is elastic at the initial stage and becomes inelastic when the price reduces. The study also highlights the importance of marketing management and strategic management in fulfilling customer demand and achieving market growth.

Business economics

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Business Information..........................................................................................................3
Demand and Market Equilibrium...........................................................................................4
3. Demand substitution...........................................................................................................7
REFERENCES..............................................................................................................................11
Books and Journals........................................................................................................................11

INTRODUCTION
MAIN BODY
1. Business Information
Information of chosen product
Apple Inc. which is formerly known as Apple computers which is a multinational
corporation which is creating consumer electronics, personal servers, computers and software.
This is a digital distributer of media content and the core products of this company are iPad,
iPhone, and Macintosh. Founders of this company are Steve Jobs, Steve Wozniak and Ronald
Wayne. This company was stared in the year 1977 in California.
Apple iPhone 12 pro Max was introduced in October 2020. Tim Cook has invented this product
as per the needs of customers. There are majority of people who choose iPhone over Android
phone. iPhones remain to be the simplest and easiest phone used by humans. The look and feel
of iOS has not changed since years and it is one of the advantage of iPhone. Another factor is
security. iPhone provides more secure ways for any individual. Data is the most valuable thing
for any user that is why iPhones provide them best security applications. Data is valuable for any
person and thus, it is advised to use iPhones. iOS is an operating system which is immune to
malware and apps of iOS are more secure. There is a continuity feature in Apple products as
company provides series of Apple iPhone products. Airdrop is another feature which provides
easy transfer of videos, photos and I Cloud sync. iPhone has gained lot of popularity within
market because of the manufacturing company Apple Inc. This is known as most admired
smartphone producer within world. It was first produced in the year 2012. It is sold in different
markets across the world.

Demand and Market Equilibrium
iPhone is known as one of the smartphone brand that is available in market across
different countries. There are some companies like Nokia and Samsung which have been
imitating Apple Inc. for manufacturing smartphones which are trendy in market. iPhone operates
in oligopolistic market in which there are few sellers who are offering particular commodity or
service. In this type of market there is depiction of demand curve which is usually kinked. In the
era of stiff competition between different companies it is essential for a business like Apple to
satisfy different customers. Apple has to follow plans and regulations in order to fulfil demand of
several customers. Market equilibrium is a major stage which includes development of various
goals and procedures that are essential for business development. It is the crucial of strategic
management which is helpful in development of a business to gain market growth. Many
companies in global market take assistance of precise marketing management to manage demand
of products and services. A company has to keep an eye on various customers in order to develop
best approach at the marketplace. Different national and international companies at the
marketplace raise demand of different products and services. Apple in most of the cases achieve
market equilibrium with maximum cases and business development aspects. The major aim of
the company is to fulfil demand with quality production so Apple use optimum ways of fulfilling
demand of different customers in a precise manner. Apple mainly gives responsibility to
production management for fulfilment of demand of customers by production of quality products
and services. Major aim of Apple is to fulfil customer demand and provide world class after sales
service. Apple also takes assistance of strategic management to fulfil demand of different
customers in a precise manner. It is important for Apple to anticipate demand of different
products and services in the marketplace. The strategic management of Apple anticipates
demand of different products and services with optimum efficiency. The reason for this is elastic
nature which can later be inelastic. This is represented in the graph below –

Figure 1Demand curve of iPhone
(Source: iPhone kinked demand curve.2021)
From the above graph, it is clear that demand of iPhone is elastic at initial stage as sellers
were very few. When price of smartphones reduces then there is expectation that demand is
going to shoot up. This will cause entry of more producers of smartphone which will be used by
several customers. It is concluded that after some time, when sellers will be more then price will
become inelastic. This means that when price changes then it effects demand of product. In the
end, price is going to become sticky as sellers are not going to change the price. If they are going
to do so, then demand will diminish tremendously.
Price of substitutes – The price elasticity of demand is known as responsiveness of quantity
that is demanded of a product or service. Demand for product is inelastic when consumer is
paying almost any price for the product. On the other hand, demand for product can be elastic
when consumer is paying a certain amount of price or narrow range of price for the product.
Inelastic demand consists of producer which can raise price without diminishing the demand of
product. The demand of iPhone is just inelastic initially because it is a unique phone which
provides lot of functions. After few months, competitors within market set price of their product

comparatively less than iPhone. At this time, Apple reduces the price and at this time main
competition takes place between iPhone and other smartphones. As demand is price elastic so
when there is rise in price then there is reduction in total consumption on the phone.
Price of complements – With iPhone here are several apple products which come in
complementary. Apple watch, ear buds, etc. For Apple watch, people can easily and affordably
expand the brand collection for ensuring any occasion. The price of these products is directly
linked with iPhone charges. Apple also try to give optimum discounts and offers on different
accessories which is helpful in attracting large number of customers from the marketplace. Apple
takes into consideration feedback of different customers in order to achieve customer
satisfaction. The company generally takes into consideration suggestions from different
customers to gain competitive advantage. It is the major responsibility of marketing management
to advertise for complementary products of the business entity. Company takes help of various
advertisements that are designed by marketing department of Apple. Customers of Apple are
stick to the company due to quality production and best after sales services. It is major
responsibility of marketing department of Apple to develop attractive advertisement of products
and services.
Consumer income – This factor is associated with the amount of money an individual is
earning. On iPhone people spend lot of money for owning it. This product is a luxurious one and
it is not affordable by every individual. It is only bought by mid or high level earning
individuals. Rates of iPhone are high and hence consumers buying it are also earning high.
Consumer taste and preference – Apple is able to successfully create lucrative product family by
using iPhone. This provided entry in different countries as it is the most trusted and innovative
phone within market. iPhone has developed good reputation in consumer mind-set within just
three years. This brand has passed blackberry which ruled phone market for 5 years. As per the
reports, it is clear that Apple iPhone sold 25 million handsets while RIM moved to 12 million.
According to this statistics, there was 90% growth of handsets which were sold over the same
quarter last year. There are more than 50,000 devices
Consumer expectations of price – The price of Apple products is generally very high so
consumers always prepare themselves for buying products. The I Phone is priced very high but it
is sold in the market at higher pace as its quality is great with respect to other competitors. Many

companies in global market like Samsung, Nokia develops products with less price and sell them
in a slow pace.
Demographics – Particularly the target of Apple is generation which is young in order to sell its
products at the marketplace. The company designs specific products while keeping in mind the
demand of target customers to increase sales.
3. Demand substitution
Substitution effects V/S Necessity – The substitutes of a product makes different choices
related to availability of different products at the marketplace. It is the major responsibility of
marketing management to development a precise approach at the marketplace which is effective
in development of price of a product. The company has to achieve many business targets with
the help of demand substitution and achieve them in a specific time frame to achieve group
goals. The substitution of different products and
Income effects- According to recent market trends the threat of Apple has increased as many
new competitors are entering market with new products. The company is taking into
consideration various income related issues of customers to produce goods in the global and
national marketplace. Income of all consumers are not same so the company has to develop
products for all segments and types of products. The company can also develop a precise
business strategy which is helpful in development and business growth. Many different
companies in the market are coming up with various products and services that are suitable for
many customers.
Pricing policy – It is essential for a company to decide best prices for product with the help of
appropriate business strategy to succeed at the marketplace. It is the major responsibility of a
business to decide optimum price for product and services to develop competitive edge. An
organisation has to keep in mind effective pricing policy in order to meet demand of different
customers. Apple analyse whole market with the help of strategic and marketing management to
develop precise pricing strategy. It is major responsibility of management to develop a precise
approach by the help of strategic management. The management should follow various rules and
regulations in order to handle different price related operations and strategies. Apple takes
suggestions from marketing management to develop different price of products and services. The
company tries to formulate reasonable price for its products and services to rule the marketplace.
A company should essentially follow various rules and regulations which are effective in

policy formation related to price of different products. Many successful organisations at the
marketplace like Apple develop pricing strategy with the help of professional experts to attract
large number of customers from the marketplace. It is the major strategy of the company to
develop various approaches in the field of management to attain organisational goals. It is the
ethical role of marketing department to develop appropriate strategy for the business to develop
market responses. The competitors of Apple like Samsung also focus on product development
with respect to price in order to develop different products. Many different competitors of Apple
are engaged in official development of business with the formation of appropriate organisational
strategy. The business entity in order to compete at the marketplace should consult different
agencies which are effective in formulating different business goals. A business organisation
must also take decision related to business development within a short period of time to related
with different functions. In many different organizational culture and activities there is a major
role played by pricing strategy. Business growth should be facilitated with the application of
various theories that are effective in development of a business. Many different companies at the
marketplace consider income of different customers as a major criteria for business growth. The
pricing policy of Apple is reliable for major operations at the marketplace and are also beneficial
for effective growth of a business.
The general rule for supply and demand within economics is concerned with price for
products and services when increases the demand of the product declines. When demand is
increased then market will satisfy more for demand and process adjusting price. This rule is not
applied to the economics of iPhone. The demand for iPhone follows taste of consumers and these
are favourable for apple product. iPhone has been a well-known luxury product and it is in
demand of many consumers. There are different needs and demands of that the product is having
for a valuable asset. Some of the factors which are affecting demand is substitute. iPhone was
launched in 2007 and there was gap between competitors and products. After few time, the
supply of iPhone is determined as the product which is sold for enhancing the profits and sales.

Due to a scarcity of iPhone 5s on the market, black markets are offering them at inflated prices.
Impatient customers are resorting to the drug trade for their iPhone fix now that the delivery date
for the iPhone 5s has been pushed back to four weeks. iPhone 5s were selling for as much as
9,000 yuan in China's illegal marketplaces within five hours (equivalently to RM4,378). To put it
in context, a 7000 yuan iphones 5 without a costs roughly twice as much. Even while it may not
be deemed inelastic in other countries, the iPhone 5 can be regarded inelastic in the United
States. Most people perceive a smartphone to be a luxury item, yet this viewpoint is challenged
when discussing a first-world country. The cost of an iPhone 5 is deemed low when compared to
the average American salary. In 2011, the United States' per capita income was $50,054, or
$4,171 per month. In the United States, the most costly iPhone 5 (with a two-year contract with a
network provider) was $399, while the cheapest was only $199. In Malaysia, however, the
iPhone 5 is likely to cost between RM1,300 and RM1,400 with a two-year contract with a
National service. Malaysia's per capita income was only RM28,000 at the end of 2011.
(RM2,300 per month). The iPhone 5 costs 56 percent of the typical monthly salary in Malaysia,
compared to 9.6 percent in the United States. Due to the tremendous amount of competition in
the smartphone business, the price of the iPhone 5 stays essentially unaffected by consumer
desires. The smartphone market has progressed. When it comes to purchasing a new smartphone,
there are numerous possibilities. The Samsung Galaxy S3, Motorola Droid RAZR HD, and
Nokia Lumia 920, to mention a few, are all competitors. As alternatives to the iPhone 5, each of
these firms offers a wide range of smartphones. This means that the iPhone 5's opportunity cost

is any of the many different devices on the market. As a result, the iPhone 5's pricing is
extremely sensitive to market fluctuations. The bulk of people lack brand loyalty and technical
knowledge to distinguish minor variations between popular cellphones. In the United States, both
the iPhone 5 and the Samsung Galaxy S3 cost $199. In response to the announcement of the
iPhone 5, Samsung has slashed the price of the Samsung Galaxy S3 in India. This will very
certainly result in the iPhone 5's price lowering earlier than other smartphone price decreases. As
consumers become more knowledgeable and demanding, when one company lowers the price of
a smartphone, other companies quickly follow suit in strategies to succeed.

REFERENCES
Books and Journals
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Online
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