Management Economics: Demand and Market Equilibrium of Apple Handset

This report analyzes the concepts of economics management and its impact on the demand and supply of Apple handsets. It discusses factors such as price of substitutes, price of complements, consumer income, consumer tastes and preferences, consumer expectations of price, and demographics that influence the demand and market equilibrium of Apple handsets. The report also suggests a pricing strategy for Apple Inc. to maintain its market leader position.

Management economics

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Introduction of the product..........................................................................................................1
Identifying Demand and Market Equilibrium.............................................................................1
Identifying factors that influence the Price Elasticity of Demand...............................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................5

INTRODUCTION
Economics management is the study of analysing how resources, finances, spending and
income of an organisation, individual or a nation is managed to utilise it in contingent situations
(Davidson and et. al., 2012). The main aim of this report is to develop an understanding about
the concepts of economics and how it impacts demand and supply of a product. In the present
report a product range of “Apple handset” is selected which is analysed using identifying its
demand and market equilibrium. Later in this report, factors are identified which impacts price
elasticity of demand.
MAIN BODY
Introduction of the product
The product which is selected for understanding the concept of economics management is
Apple handset. Apple is an information technology company which was founded by Steve Jobs
in April 1976. This company deals in variety of product range such as handsets, music etc. Apple
handset covers a total of 66% of entire industry profits. The rationale behind selecting this
product range is its easy accessibility to the information regarding the demand and supply of this
product.
Identifying Demand and Market Equilibrium
 Price of substitutes – There are various substitutes of Apple handset but this product is
considered as a market leader (De Vos, 2012). Few substitutes of this product are
Samsung Galaxy, Huawei, Google Pixel and many more. In order to be competitive and
maintain a position in the market, the substitute companies of Apple handset has reduced
the prices of their products. This act of the substitute organisation has resulted in
decreasing demand for Apple handset.
 Price of complements – There are various complement products of Apple handset which
are created by Apple Inc. These complimentary products include Apple Watch, Apple
Airpods, Airprint, Airplay and many more. In this contemporary world, technology plays
an essential role in an individual life. Due to the current world dynamics, the prices and
demand for complementary goods has raised. This has resulted in price increase of Apple
handset as by the complementary goods; consumers enjoy an enhanced experience of the
technology. In order to evidence this situation, the increased price of every newly
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launched Apple handset can be considered. The increasing prices of the complementary
goods have enhanced the demand of Apple handset as customers can experience an
enhanced interface combining Apple handset with its complementary products.
 Consumer Income – Apple handset targets high income generating population. In the c
current scenarios of world economy, the rich individuals are getting even richer which
evident the statement that consumer’s income of Apple handset is increasing. This
enhanced income has resulted into increased demand for Apple handset as in current
scenario, consumer are more capable to afford high prices of Apple handset.
 Consumer tastes & preferences – The handset industry is rapidly growing and so as the
consumers tastes and preferences (Furlong, 2013). In current world, consumers demand
innovative features in handset which can enable them to make their life easier. In the
initial years of hand set industry, the consumers preferred hand set which can enhance
their lifestyle status which has been changed in current world as now people prefer hand
set which can resolve their day to day issues. This changing preference and tastes of the
consumers has increased the demand of Apple handset because this company focuses on
continuously innovating their products which can fulfil every requirement of their users.
 Consumer expectations of price – Due to ever increasing prices of Apple handset,
consumers of this product expects company to lower their prices in future so that it can be
accessible to individual of low income generation (Findlay and et. al., 2012). These
expectations of future low prices of this product have decreased the demand of Apple
handset. In order to compensate this price effect, Apple keeps on updating and innovating
their handsets.
 Demographics – The approximate value of Apple consumers is 46.89 million. The
numbers of buyers of Apple handset are increasing as total number of Apple handset
users were 41 million in 2017 which increased in 2018 resulting 46.89 million users
(Global Apple iPhone sales, 2019).
Identifying factors that influence the Price Elasticity of Demand
 Substitution Effects and Income effects – Apple handset are the products which target
individuals with high income group. There are various alternatives present in handset
markets which offer similar features but are available at much lower prices. This indicates
that the product of Apple handset is a luxury rather than a necessity in the eyes of its
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consumers and potential customers. Luxury goods are relatively ore elastic than necessity
goods. Luxury goods represents lifestyle value due to which consumer tend to buy more
products like Apple handset which are above than their earning potential. This discretion in
their products leads to sensitivity and brings the business cycle downwards and ultimately
results in high elasticity.
Another element to be considered in factors of price elasticity is income effects (percentage
of income). As mentioned earlier the Apple handset represents the lifestyle status due to which
people tend to buy this product if it is above their earning potential due to which it can be said
that the product of Apple handset represent a large portion of consumer’s income. This large
portion of consumer behaviour results in more elastic effect.
 Analysis – The latest pricing strategy of Apple handset is aggressive pricing strategy in
which they have offered their brand new Apple iPhone 11 in just 699 dollars which is less
than its previous iPhone version of XR which was launched with the price of 749 dollars.
This pricing strategy is followed by the Apple Inc. to maintain their position of market
leader in the industry of handset. Due to luxurious status of Apple handset, the demand and
affordability of this product is continuously decreasing due to which the management of this
company decided to use aggressive pricing strategy in which they have dropped their prices
rapidly so that revenue sales of their products can be enhanced and position of being a
market leader can be maintained effectively.
After developing the above analysis and ascertaining Apple Inc. current pricing strategy, it
has been analysed that this company should adopt pricing strategy of price skimming in which
they can establish their handsets with initial high value and then degrade it according to situation
of the industry and demand of the product (Furlong, 2013). This strategy will help the company
to gain reliable profits along with maintaining their competitive position in the market.
CONCLUSION
From the above report it has been concluded that economic management is the activity of
maintaining the resources of an organisation which is important to grow and develop in the
market. Various elements of price elasticity are evaluated in above report from which it has been
determined that Apple handset has more elastic demand than its competitors. It also been
analysed that there are various factors which can affect the market equilibrium such as
supplementary goods, complementary goods, consumer demand and tastes etc. It has been also
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concluded that Apple handset should follow the pricing strategy of skimming as by this they can
maintain their market leader position and can also earn reliable profits.
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REFERENCES
Books and Journals
Davidson, R. K., and et. al., 2012. The impact of globalisation on the distribution of
Echinococcus multilocularis. Trends in parasitology. 28(6). pp.239-247.
De Vos, J., 2012. Psychologisation in times of globalisation. Routledge.
Findlay, A. M., and et. al., 2012. World class? An investigation of globalisation, difference and
international student mobility. Transactions of the Institute of British Geographers.
37(1). pp.118-131.
Furlong, J., 2013, January. Globalisation, neoliberalism, and the reform of teacher education in
England. In The educational forum (Vol. 77, No. 1, pp. 28-50). Taylor & Francis
Group.
Stromquist, N. P. and Monkman, K., 2014. Defining globalization and assessing its implications
for knowledge and education, revisited. Globalization and education: Integration and
contestation across cultures.1 . pp.1-21.
Online
Global Apple iPhone sales. 2019. [Online]. Available through:
<https://www.statista.com/statistics/263401/global-apple-iphone-sales-since-3rd-quarter-
2007/>
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