Economic Principle and iPhone Pricing Strategy

Running head: ECONOMIC PRINCIPLE
Economic Principle
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1ECONOMIC PRINCIPLE
Table of Contents
Answer 1:...................................................................................................................................2
Answer 2:...................................................................................................................................2
Answer 3:...................................................................................................................................3
Answer 4:...................................................................................................................................4
References:.................................................................................................................................6

2ECONOMIC PRINCIPLE
Answer 1:
Apple has charged higher price for iPhone X compare to iPhone 8, while the quantity
sold for the initial product has decreased. This can be explained with the help of economic
concept. Total revenue can be obtained by multiplying total quantity sold in the market with
per unit price of the one. By comparing total revue obtained from iPhone 8 and iPhone X, it
can be stated that change in price is comparatively high compare to change in quantity
demanded (Tian et al. 2017). Hence, increase in price for unit phone has helped the company
to increase its total revenue. This can be explained as follows:
Total revenue (TRX) = total quantity of iPhone X (QX) * per unit price of iPhone X (PX)
Total revenue (TR8) = total quantity of iPhone X (Q8) * per unit price of iPhone (P8)
Here, QX < Q8 while P8 > PX.
Answer 2:
Price elasticity related to demand measures the responsiveness of quantity demanded
for a particular product when its price changes (Coglianese, Davis, Kilian and Stock 2017).
The average sale price of iPhone has increased from $ 694 to $ 796 while the quantity has
decreased from 78.29 million to 77.32 million. Hence, initial price = $ 694 and change in
price = $ (796-694) = $ 102. On the other side, initial quantity demanded is 78.29 million and
change in quantity demanded is (77.32- 78.29) million = - 0.97 million. Thus, Price elasticity
of Apple iPhone is: (Ep) = - (0.97/78.29) * 100 / (102/694) * 100
 Ep = - 0.08
Hence, the absolute value of price elasticity of demand for iPhone X is 0.08.