Report on Economic Concept and Theories

Running Head: MICROECONOMICS
Microeconomics
Name of the Student
Name of the University
Author note

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Table of Contents
1. Introduction............................................................................................................................2
2. Analysis..................................................................................................................................... 3
2.1 Analysis 1- Apple’s iphoneX model......................................................................................3
2.2 Analysis 2- Apple Ramp up Supply of iphoneX.....................................................................4
2.3 Analysis 2-iphone Market share increased- shifts in Demand for Bigger Size iphone X.......5
2.4 Analysis 2-Premium pricing for iphone................................................................................6
2.5 Analysis 2- Higher Value and Premium Status of iphone.....................................................7
3. Conclusion.............................................................................................................................. 8
4. References..............................................................................................................................9

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1. Introduction
In modern world smart phone becomes one of the necessary items. People become
increasingly dependent on the advanced application used in the smart phones. There are
various companies selling smart phones. Among them Apple is one of the renowned brand. The
brand value of Apple iphone becomes more of a status symbol than its utility.
The report analyzes the market for Apple iphone using economic concept and theories.
Specifically the model of iphone X is taken for consideration. The market structure, its demand-
supply condition, market share, pricing strategy and premium value of the product is discussed.
Relevant articles are chosen and evaluated using basic microeconomic concept.

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2. Analysis
2.1 Analysis 1- Apple’s iphoneX model
Source:http://www.pocket-lint.com/news/142344-apple-iphone-x-vs-iphone-7-vs-iphone-6s-
what-s-the-difference
Summary
Apple has recently launched its new gadget iphone X. the new model is introduced
alongside with the existing model of iphone 8 and iphone 8 plus. The latest version comes with
more attractive designs not only with its outlook but also there are differences in the hardware
as compare to previous standard model. It has a frame made up with stainless steel having a
glass rear and a screen front (www.pocket-lint.com, 2017). The model is modified with a
removed home screen and a vertically aligned dual camera. The article compares new iphone X
model with its earlier version of iphone6 and iphone7.
Analysis
Production Possibility Frontier shows the maximum amount of output that can be
produced using the given resources of the economy. The slope of the production possibility
curve shows the opportunity cost of production (Kolmar, 2017). In order to increases
production of one good resource are to be shift from one industry to another.
In case of apple to launch it new product it suffers resource allocation problem. The
manufacturing of iphone X is suffered. The woes with production of iphone X lead to some
delays in the new product launching.

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2.2 Analysis 2- Apple Ramp up Supply of iphoneX
Source:https://www.businessinsider.in/The-iPhone-X-will-likely-be-in-tight-supply-as-preorder-
demand-could-top-50-million/articleshow/60831596.cms
Summary
Until first half of the next year Apple has warned of maintaining a tight supply of the
product. Apple just launched it iphone 8 models but iphone X is the most advanced and
technologically advanced model that placed in stores on 3rd November. It is estimated to have
lot of demand at its first go. The existing users of Apple using earlier version such as Apple
iphone 6 and 6s to are ready to pay a considerably high amount to obtain the upgraded device
(www.businessinsider.in, 2017). When demand goes up then it will be difficult for buyers to find
the wished product and Apple manufacturer ramp up their supply to meet the demand.
Analysis
Demand in the market refers the willingness of buyers while supply refers to the seller’s
willingness to supply the product. These two forces determine equilibrium condition in the
market. Initially the lack of supply for the new product raises the price. To fulfill the needs of
Apple buyers it must raise the supply and balances the demand-supply and equilibrium (Arrow,
2015). However, the bottleneck in production is responsible for the inability of supply to meet
the demand. This makes difficult to attain mass production and pushes prices up.

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2.3 Analysis 2-iphone Market share increased- shifts in Demand for Bigger Size iphone X
Source:http://info.localytics.com/after-first-weekend-of-sales-iphone-x-adoption-is-stronger-
than-the-iphone-8-8-plus
Summary
The newly introduced high priced model of iphone X is has successfully raised trhe
market share of the company. The model captured 0.93% shares in the market as recorded
after the sales of first week. The model attracts new pull of excitement and fanfares that were
not achieved with earlier iphone 8 and 8 plus. The availability of pre ordering the iphone X prior
to the official release made it more common in hands (info.localytics.com, 2017). Special
promotion offers the customers to upgrade the product without need of paying the full price.
The market share of 0.93% in the first weekend goes beyond the 0.7% share associated with
iphone 8 model.
Analysis
Market equilibrium is the point where market demand coincides with market supply. In
the competitive market is determined completely with the forces of demand and supply.
However, in the concentrated market the share of supplier determines the market power.
Larger the market share greater is the market power (Nicholson & Snyder, 2014). The large
share of Apple gives it high market power to influence prices. Apple enjoys a monopoly position
with its growing market share.

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2.4 Analysis 2-Premium pricing for iphone
Source:https://www.billboard.com/articles/business/7964782/iphone-x-apple-pricing-strategy-
analysis
Summary
The Apple manufactures follow a premium pricing strategy to determine the price. The
price has reached to a point of high price exclamation. The iphone X announces a price of $999,
which is double the original cost of iphone in a decade ago. The price is higher than other
competing device in the market. In fact, it is in line with Apple’s strategy of supplying pricey
gadget. Apple’s premium pricing reflects the long held belief of Apple that demand becomes
inelastic for customers once the supplied product is designed so well that they cannot live
without them. The first iphone offered at a price of $499 (www.billboard.com, 2017).
Analysis
Elasticity of demand refers to the change in the demand in response to the price of a
good. When demand responsiveness is high then it is called elastic demand while low demand
responsiveness reflects inelastic demand. Revenue of the company depends on the demand
elasticity. The technologically advanced gadget of Apple makes the demand inelastic.
Therefore, premium pricing would not result in a drop in revenue.

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2.5 Analysis 2- Higher Value and Premium Status of iphone
Source http://gulfnews.com/opinion/thinkers/with-iphone-x-phone-is-back-as-a-status-symbol-
1.2090247.
Summary
Price of iphone X is the most attractive feature of it in distinguishing the new model with
the earlier ones. The price rises despite the advantages of scale economies and cheap
production cost. In times of launching the new product Apple manufacturer announces to
supply the new model at a limited quantity. The supply shortfall has worked in favor of Apple
with raising price and strengthens the status of an ultra premium product. The price of iphone
always works as a status symbol. Since its release in 2007, it comes with an exclusive status
quo (gulfnews.com, 2017). Now to maintain its premium status the manufacturer tries to give a
differential design with every new version.
Analysis
The term utility refers to the amount of satisfaction received from consumption of a
good. As suggested by Alfred Marshall people’s willingness to pay for a product depends on the
additional utility derived from the additional consumption. The features enabled with smart
phones make them important to them. This is the reason people willing to pay much more to
obtain the best phone. This gives Apple an additional edge to Apple and it charges extra price
for their product over its competitors.

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3. Conclusion
The paper has discussed marketing status of Apple’s newly launched product iphone X.
The new model already captures a significant share in the market and beats the share of iphone
8 and 8 plus. What the suppliers need is to adequately supply the model in their stores and
balance its supply and demand. The high status value still attracts iphone lover to have the new
model.
The newly introduced iphone X is distinct from its earlier model. The company made
some difference in its outlook and interface. However, there is some manufacturing problem
that lacks its supply and the company announces to provide unrestricted supply only in the first
decade of 2018. As a whole, launching of the new model raises its market share and expected
earn more profit from this model.

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4. References
After First Weekend of Sales, iPhone X Adoption is Stronger than the iPhone 8 & 8 Plus.
(2017). Info.localytics.com. Retrieved 23 November 2017, from
http://info.localytics.com/article/after-first-weekend-of-sales-iphone-x-adoption-is-
stronger-than-the-iphone-8-8-plus
Arrow, K. (2015). Microeconomics and operations research: Their interactions and
differences. Information Systems Frontiers, 17(1), 3-9.
Gulfnews (2017). Retrieved 23 November 2017, from
http://gulfnews.com/opinion/thinkers/with-iphone-x-phone-is-back-as-a-status-symbol-
1.2090247.
iPhone X Puts Exclamation Point on Apple's Pricing Strategy. (2017). Billboard. Retrieved 23
November 2017, from https://www.billboard.com/articles/business/7964782/iphone-x-
apple-pricing-strategy-analysis
Kolmar, M. (2017). Principles of Microeconomics. Springer Texts in Business and Economics
ReDIF-Book.
Nicholson, W., & Snyder, C. M. (2014). Intermediate microeconomics and its application.
Cengage Learning.
O'Boyle, B. (2017). Apple iPhone X vs iPhone 7 vs iPhone 6S: What's the difference? -
Pocket-lint. Pocket-lint.com. Retrieved 23 November 2017, from http://www.pocket-
lint.com/news/142344-apple-iphone-x-vs-iphone-7-vs-iphone-6s-what-s-the-difference
The iPhone X will likely be in 'tight supply' as preorder demand could top 50 million .
(2017). Business Insider. Retrieved 23 November 2017, from
https://www.businessinsider.in/The-iPhone-X-will-likely-be-in-tight-supply-as-preorder-
demand-could-top-50-million/articleshow/60831596.cms