Managerial Economics and Pricing Policy of Ipads

This document discusses the role of managerial economics in managing business assets and highlights the pricing policy of Ipads. It covers concepts like demand, market equilibrium, price elasticity of demand, and different pricing strategies. The case of Apple Inc and its Ipad Pro products is explored in detail.

Management
Economics

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Introduction of Product................................................................................................................3
Identifying Demand and Market Equilibrium in context of External Factors.............................4
Identifying Price Elasticity of Demand.......................................................................................7
Pricing policy of Ipads.................................................................................................................9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
Books and Journals....................................................................................................................13

INTRODUCTION
Managerial economics can be described as that branch of economics which together has concepts
of Management and economic concepts, tools, theories and methodologies related with monetary
aspect (Daft, 2021).
Management economics is very helpful in solving practical problems of businesses that
influence on economics of the organisation as well. The selected organisation for this report is
Apple Inc, and chosen product is Ipad Pro products of Apple Inc. In this report role of
Management Economics is highlighted in and also its concepts are used to demonstrate
performance of selected products in market. Identification of market equilibrium and demand
with it's influence on different factors will also included in this report. In the last, factor that
influence on price elasticity of demand are also discussed along with deciding over suitable
pricing policy for Apple Inc in case of Ipad Pro.
MAIN BODY
Introduction of Product
Apple Inc had decided to bring such product in market that offers consumer as similar
experience like the one they get in operating desktop PCs. A product that can offer more power
and resolution effects to consumers along with some advanced features of new age technology.
Also, the product design is such way that it can be operated by consumers like Desktop PC, they
can pair it keyboard and Apple Pencil. Ipad Pro has stylish utility for Artistic work and writing
works as well, where drawing and writing can be made more fluidly and precisely.

Figure 1: Ipad Introduction
Identifying Demand and Market Equilibrium in context of External Factors
Demand and Market Equilibrium are concepts of Microeconomics. Demand is the
quantity of Ipad Pro, which the consumers in market are willing to buy at given prices of product
at a point of time (Samuelson, Marks and Zagorsky, 2021). And, Market Equilibrium is the
position of Ipad pro in market when demand is in match with the supply of product. It is the
situation of stability in prices and quantity of product. In this section of report, Demand and
Market equilibrium for Ipad Pro is determined in context of different external factors.
Price of substitutes- Substitutes products are those which consumers have an option to buy
rather then buying Ipads offered by Apple. It does not mean buying similar kind of product of
other company but it is about changing the product itself. Here, substitute products offers same
level of utility to consumers. In case of Ipads, substitute products can be Mobile, laptops etc. The
relation with substitute products is proportionate (Datta, 2017). That means, if prices of
substitute products rises than demand of Ipad will increase and if prices of substitute products are
seen decreasing then demand of Ipad will decrease. In both the cases, Market equilibrium
established for Ipads in market will get disturbed because there is sudden fluctuation in demand.

Considering increase in demand due to increase in prices of substitutes. At the existing supply
there will occur excess demand of Ipads, leading to rise in prices of Ipad eventually. But this is a
short term effect and market will again get stable when increased prices will lead to decrease in
demand of Ipad, as law of demand will be enforced.
Price of complements- Complement goods are those goods which are used along with Ipads.
Complement goods are seen completing use of Ipads for consumers. There is understanding that
without one another has no utility to offer. For Ipads, most obvious complementary product at
this time is internet services, like Wi-Fi and Net-setters, modem etc. There is inverse relation
between prices of products of complementary products and the demand of Ipads. This is so
because law of demand will be applicable on both of them in same manner. Therefore, if prices
of complementary products like internet services will rise, then demand for Ipads will decrease.
Similarly, if prices of complementary products will decrease, then demand will rise. In both
cases, there will be sudden change in demand and market equilibrium will be disturbing (Teece,
2019). For example, when there will be decrease in demand due to increase in prices of
complementary products, situation of excess supply will prevail leading to fall in prices of Ipads.
But again, by the time equilibrium will re-establish as Ipads will be supplied lesser than usual.
This is because of enforcement of Law of Supply.
Consumer Income- There is a direct relation between demand of Ipads and income of the
consumer. Ipads are new age technological products which are mostly used and procured by
consumers to establish their quality and status of lifestyle. Hence, it is obvious that consumers
will be making expenses over these products along with rise in their income. Because at the low
level of incomes consumers shall be making expenses over basic and essential products only,
such as food, shelter and cloths. Therefore, it can be said that with increase in income of
consumers, demand for Ipads will rise and with decrease in income demand for the same will
fall. In this case as well, Market equilibrium will be seen disturbing for time being, because with
increase in income and increase in demand for Ipads, situation of excess demand will erupt in
market, leading to rise in prices. At the increased prices consumers will then prefer to buy lesser
because Law of Demand is evident (Bosshardt, and Walstad, 2017).

Figure 2: Ipad 2018 vs Ipad 2020
Consumer tastes & preferences- Consumer tastes and preferences also has direct relation with
demand for Ipads. If consumer preferences are favourable with the Ipads, there will be obvious
more demand for Ipads in market. And if consumer preferences and sentiments are negative or
unfavourable, then demand would be lesser for Ipads. Consumer preferences are driven buy
various factors, and all such factors are such which can levy positive impact over demand of
Ipads. These factors could be like reduced prices of Ipads, increase income of consumers,
declined utility in rival products and many more. And, also unfavourable changes in these factors
will lead to negative impact on consumer tastes and preferences and therefore demand for Ipads
will reduce. In these cases market equilibrium will obviously get disturbed due to similar reason
of sudden change in demand. In case of negative consumer sentiments demand for Ipads will fall
and there will be situation of excess supply in market, leading to sudden fall in prices of Ipads.
At the decreased consumers will start demanding more and suppliers will supply less. Demand
will expand and supply will contract and at some point both will meet again.
Consumer expectations of price (of your product)- Consumer expectations of price is the
feeling and sentiments of consumers regarding the prices of products. This is an aspect which
talks about predictions of consumers related to prices of products, that whether prices of products
will rise in future of whether it will decrease in future (Castillo-Vergara, Alvarez-Marin and
Placencio-Hidalgo, 2018). These predictions influence demand for Ipads in market because they
channelize behaviour of consumers. If consumers forecasts that prices may rise in future, they

will start demanding less from the point of forecast onwards and hence demand will reduce
creating situation of excess supply in market and therefore prices will start reducing. At
decreased prices and consumer will pick up the demand and suppliers will reduce supply,
resulting in expansion of demand and contraction of supply and at some point they both will be
meeting to establish equilibrium in market again.
Demographics/Number of Consumers (Buyers)- In economics factor of number of buyers is
seen with the similar effect that income of consumers have. It is considered that ore the number
of consumers means more number of people with money and they will make procurements of
Ipads increasing sales for the product. Therefore, larger number of buyers will be favourable and
will have more demand in market for Ipads.
Figure 3: Ipad Pro vs Microsoft Surface Pro
Identifying Price Elasticity of Demand
Price elasticity of demand is the change in quantum of products that consumer is
demanding with respect to per unit change in price. This means that, Price elasticity of demand
measures the extent to which any factor is causing a change in quantity demanded of commodity
by changes that they are leading over the prices of commodity (Bourke, 2019).

Substitution effect- Substitution effect is that where consumers in market decide shifting to
some other products where they find same utility like Ipads. Consumers in the market decide to
move because their expectations are not seen fulfilled by Ipads. These expectations can b
regarding prices or the service. Hence, consumer can substitute any other category of product
with Ipads. Drift of consumers is also considered important because in ethical consideration it
stops company from using monopoly policies (Melnik and Antipova, 2019). Also, it induces
company to maintain compatibility of its products. Ipads are new age technological products
which are considered luxury by consumers and thus their demand in market stands vulnerable. In
luxury products consumers are not seen investing much time and money. The stability in market
is assured only till prices are perceived as fair and reasonable by consumers. Therefore, price
elasticity of demand in this context for Ipads is highly elastic or greater than 1.
Figure 4: Product overview Microsoft Surface Pro vs Apple Ipad Pro
Consumer income- Consumer incomes are decisive of demand directly in the market. Through
the use of their income or appropriation of income, consumer exactly reflects their behaviour and
sentiments towards different range of products in market. As Ipads are luxurious products,

therefore even in most general understanding and behaviour, consumers will only be making
expense over these products with higher incomes. Consumers mark it as improvement in their
quality of life. However, the change that is bought in quantity demanded along with increase in
income is not that big. This is because consumers have tendency to distribute their increase
among various products that altogether improves their quality of life, and they are not seen
spending entire increase over Ipads. Hence, price elasticity of demand in case of consumers
incomes cannot be considered higher and it stands less than 1.
Pricing policy of Ipads
Under Microeconomics there are many pricing policies that can be followed by Apple Inc.
Some of these strategies can be listed as Penetration pricing, Skimming pricing, Premium
pricing, Cost-plus pricing and Price building. Apple can choose any particular pricing policy
after considering the cost that is incurred on manufacturing Ipads and the profiteering that it is
aspiring for. But, these are only some basic and primary factors of deciding pricing policy and
some other factors that are included, such as competitive advantage policy of company, policy
followed by competitors, sentiments that company want to arise and some sort of manipulation
strategies for market of company also effect a particular pricing policy of Company (Rikap,
2018).

Figure 5: Ipad Multi core performance
In case of Ipads of Apple Inc, most favourable pricing policy would be competitive
pricing policy. Under competitive pricing policy, Apple is not seen getting carried away by its
fame and popularity in market but frame its policy in consideration with other important factor
competitions. It makes such policy where Ipads must be perceived as product with highest
competence and with reasonable pricing. A significant watch over the policies of competitors is
required (Fagiolo and et.al., 2019). Here Ipads will be presented in manner that it should not be
perceived by consumers as too expensive or too cheap, but one with fair and reasonable prices.
This policy retains faith of consumers in best possible as high values and utility are also offered
and privces are increased with increase in utility. Continue innovations and value addition that

Ipads brings in market also pressurize competitors to make innovations and keep the prices in
range of fairness, In this manner kind of stability is seen made in market by this policy.

CONCLUSION
Therefore, from the above discussion it can be concluded that Managerial economics is not a
concept that only helps organizations of any scale and size of business operations to avoid
unforeseen difficulties and tragedies but it also helps in managing business assets in such manner
where competitive advantages could be sustained for longer run. As Managerial concepts and
Economics concepts both are used in combination of best utility than several advantages of
market drivers, pricing policy, investment decisions and many other such factors could be
efficiently managed and utilised. Economics in a business has large scale implications, and its
management in managing and controlling these economic factors for business benefits are
inevitable. Therefore, its management gets necessary.

REFERENCES
Books and Journals
Daft, R. L., 2021. Management. Cengage Learning.
Samuelson, W. F., Marks, S. G. and Zagorsky, J. L., 2021. Managerial economics. John Wiley &
Sons.
Datta, D., 2017. Managerial Economics. PHI Learning Pvt. Ltd..
Teece, D. J., 2019. A capability theory of the firm: an economics and (strategic) management
perspective. New Zealand Economic Papers. 53(1). pp.1-43.
Bosshardt, W. and Walstad, W. B., 2017. Economics and business coursework by undergraduate
students: Findings from Baccalaureate and Beyond transcripts. The Journal of Economic
Education. 48(1). pp.51-60.
Castillo-Vergara, M., Alvarez-Marin, A. and Placencio-Hidalgo, D., 2018. A bibliometric
analysis of creativity in the field of business economics. Journal of Business
Research. 85. pp.1-9.
Bourke, E., 2019. Smart production systems in Industry 4.0: Sustainable supply chain
management, cognitive decision-making algorithms, and dynamic manufacturing
processes. Journal of Self-Governance and Management Economics. 7(2). pp.25-30.
Melnik, M. and Antipova, T., 2019, May. Organizational aspects of digital economics
management. In International Conference on Integrated Science (pp. 148-162). Springer,
Cham.
Rikap, C., 2018. Innovation as economic power in Global Value Chains. Revue d'economie
industrielle. (3). pp.35-75.
Fagiolo, G. and et.al., 2019. Validation of agent-based models in economics and finance.
In Computer simulation validation (pp. 763-787). Springer, Cham.