Economics of Apple iPhone Pricing Strategy

The assignment examines the case of Apple's decreasing sales quantity but increasing revenue due to high prices. It discusses the concept of price elasticity of demand and how it applies to Apple's situation, with a price elasticity coefficient calculated as -0.0842. The analysis also considers the impact of Samsung's entry into the market on Apple's demand and pricing strategy.

ECONOMICS QUESTIONS

Table of Contents
PART 1............................................................................................................................................1
1...................................................................................................................................................1
2...................................................................................................................................................1
3...................................................................................................................................................1
4...................................................................................................................................................3
REFERENCES................................................................................................................................4

PART 1
1
As per the given case scenario quantity of sold products of Apple are decreasing but sales
price of the company is increasing rapidly. The main reason of increasing revenue of the
business is entity has set its iPhone prices high. If demand gets changes slightly then it impacts
high on prices. That is why overall revenues of the firm is increasing rapidly. Apple's products
have high quality and it has brand image (Karlan and Zinman, 2018). That is why people are
very positive towards the firm. If company is offering high price products then also people like
to buy its phone. That is the main reason that quantity of sold goods is decreasing then also
company is able to earn more profit because its offered prices are too high.
2
Price elasticity of demand can be defined as changes in demand with respect to changes
in prices.
sales in 2017 (A) 78.29
Sales in 2018 () 77.32
Formula B-A/A
-0.0123
Price 2017 (c) 694
Price 2018 (D) 796
d-c
102
102/694=0.14
Price elasticity
=-0.0123/0.14
=-0.0842
3.
Demand curve is the diagram that shows interrelationship between prices and quantity.
These both elements are interrelated if one gets changed then other get affected too. Present case
1

is of price inelastic demand where demand is zero. If demand gets fluctuated then also prices do
not get affected (Sun and Ouyang, 2016). People are ready to pay high prices, its market prices
are increasing without contraction in demand quantity of sold items
From the above demand curve it is reflected that Apple is increasing its prices but
quantity of sold items are decreasing. As sales is increasing that impacts less in quantity but
effects high to the prices of Apple iPhone. If demand of the products get changed then
equilibrium will get changed. It is the case of price inelastic demand, If elasticity of demand <1
then it is considered as price inelastic. It reflects that if selling of item is less than also company
is able to earn more profit because it is increasing its prices regularly. Earlier quantity sole by
Apple was 78.29 when prices of the products were 694 but later on company's prices have got
increased 796 and quantity of sold products got down by 77.32. That reflects that demand
impacts on quantity less but affect the prices of products to great extent.
2

4
Samsung is the biggest competitor of Apple, if Samsung make changes in its prices, d supply
then it will impact on Apple's prices and quantity as well. Samsung has introduced new same
model as iPhone has. Due to launching of Samsung phone demand of the products get changed
and now Apple has to face huge competition. This has decreased demand of Apple's phone
significantly because Samsung is offering products at lower prices. After changes in demand
overall prices and quantity of sold products get changed. Apple has become bound to reduce its
prices so that consumers buy its products and it can sustain in the market for longer duration.
3

REFERENCES
Karlan, D. and Zinman, J., 2018. Price and control elasticities of demand for savings. Journal of
Development Economics. 130. pp.145-159.
Sun, C. and Ouyang, X., 2016. Price and expenditure elasticities of residential energy demand
during urbanization: An empirical analysis based on the household-level survey data in
China. Energy Policy. 88. pp.56-63.
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