Microeconomics Principles: Analysis of Apple's PPF, Demand and Supply, Market Equilibrium, Inelastic Demand, Utility and Budget Line

This paper analyses microeconomic principles such as PPF, demand and supply, market equilibrium, inelastic demand, and utility and budget line, taking the case study of Apple. It discusses the impact of limited resources on production, changing customer preferences on demand, equilibrium price, inelastic demand and increased total revenue, and the unique value proposition of Apple products.

Page 1 of 10
ECONOMICS ASSIGNMENT
MICROECONOMICS PRINCIPLES

Page 2 of 10
Table of contents
Introduction................................................................................................................................3
2.0 Analysis................................................................................................................................3
2.1 Analysis 1- Topic- PPF and opportunity costs.................................................................4
2.2 Analysis 2- Topic- Demand and supply...........................................................................5
2.3 Analysis 3- Topic- Market equilibrium............................................................................6
2.4 Analysis 4 – Topic- Inelastic demand and increased total revenue..................................7
2.5 Analysis 5- Topic- Utility and budget line.......................................................................8
2.5 Analysis 5- Topic- Utility and budget line.......................................................................8
3.0 Conclusions......................................................................................................................9
Reference..................................................................................................................................10

Page 3 of 10
Introduction
Macroeconomics is a branch of economics that deals with the behaviours of sellers and the
buyers of the market at entity specific level. Contrary to the scope of macroeconomics, it
does not consider all the sectors and patrons of the economy as a whole. There are a number
of sub-topics of microeconomics which allows the reader to understand the behaviours of the
economic entity in a more detailed way. These include PPF of the producers, demand supply,
market equilibrium, and elasticity of demand and the utility of the customers of the market.
The aim of the paper is to analyse all these topic of microeconomics taking the case study of
Apple, the leader in the modern digital gadget industry.
2.0 Analysis

Page 4 of 10
2.1 Analysis 1- Topic- PPF and opportunity costs
Source: https://appleinsider.com/articles/18/03/10/made-for-i-branding-may-be-shifting-
focus-from-ipod-to-iphone-and-ipad
Summary:
The number of employees producing the products of the company is limited. Apart from
those labour resources, other resources of production such as time and budget are also limited
to the company. Given, that the company faces trade-off between the production of two of the
popular products of the company, i-pad, and i-pod. Therefore, they are shifting their focus
from i-pod to i-pad
Analysis
All the types of resources are given for any kind of company or entity in the economy.
Likewise, the resources of Apple Company are also limited and hence increasing the
production of one product reduces the production of the other product. Therefore the shift of
focus of the company from i-pod to i-pad also reflects on the resources of the company as
well.
Figure 1: The production possibility frontier of apple
(Source: Developed by the learner)
In this case, the immediate effect is the reduction in the production of i-pod and the increase
in the production of i-pod. The PPF curve has rotated a little in this case showing that the
devotion of labour in i-pad production has increased. Therefore, given the same quantity of
labour and time and other resources, the company can produce an extra amount of i-pad only
after reducing the production of the i-pod. The PPF of the company, thus, shows that
opportunity cost of more i-pad is the production of i-pod which needs to be given up
(Friedman, 2016).

Page 5 of 10
2.2 Analysis 2- Topic- Demand and supply
Source: https://mybroadband.co.za/news/business/257399-demand-for-the-iPhone-x-is-
fading-already.html
Summary:
As per the discussion in the article, the demand for the i-phone was starting to fall 6 months
after the introduction of the newest product called i-phone x. The article also states that it is a
concern for the investors of the market as the reduced demand in the market can also affect
the returns of the investors as well.
Analysis:
In this case, highlighted in the article, there has been a change in the demand side of the
market keeping the supply side intact. The preferences of the customers of the market are
changing and hence the demand for the product is reducing (Goodwin et al. 2015). As per the
principles of economics, there are a number of factors that influence the demand for a product
in the market and the preferences of the customers are one of them. These factors shift the
demand curve altogether bringing changes in the prices of the market as well.
Figure 2: the leftward shift in the demand curve
(Source: Developed by the learner)
The leftward shift in the demand curve of the market and the unchanged supply curve may
result in the decreased price level and hence the revenue of the company. Therefore, this also
concerns the investors as there is a chance of reducing the returns from the investment as
well.

Page 6 of 10
2.3 Analysis 3- Topic- Market equilibrium
Source: http://bgr.com/2018/03/26/iphone-x-2018-price-vs-samsung/
Summary:
I-phone is one of the sought after mobile products in the world. With the increase in the
income of the middle-class population throughout the world the demand for the i-phone has
increased since the last decade. This increase in the demand for the product has increased the
price of the product which has attracted a lot of criticism.
Analysis:
As per the principle of economics, the price and the quantity of the market are determined
through the interaction of demand and the supply of the market. In this case, as per the data
article, the demand for the i-phone has increased 61% since the last decade. Along with that,
the supply has not really increased since the introduction of the first i-phone in the year 2008.
Figure 3: the equilibrium price of i-phone in the market
(Source: Developed by the learner)
The rightward shift in the demand curve since the introduction of the first i-phone has
increased the equilibrium price of the market (Karlan, 2017). Although it has attracted
criticism for the company for setting the prices of the product too high, it is also because of
the fact that at this high price the market gets cleared due to the interaction of the demand and
the supply.

Page 7 of 10
2.4 Analysis 4 – Topic- Inelastic demand and increased total revenue
Source: https://www.wsj.com/articles/apple-expected-to-report-higher-prices-drove-record-
quarterly-revenue-1517482800
Summary:
The price of the products of apple is increasing, partly due to the increase in the demand for
the products of apple and partly due to the high cost associated with the technology that is
being used in the products. This article reports that the changes in the prices of the products
are increasing the total revenue of the company.
Analysis:
As per the statements of the article the revenue of the apple as an organisation is increasing.
The principles of economics state that the revenue from a product with the increase in price
can also happen if the price is inelastic in demand. Inelastic good, is a good whose demand
changes proportionately less than the changes in the price. This happens when the product in
question becomes necessary to the customers of the market. In this context, it is important to
note that the products of apple especially the i-phone uses the best technology compared to
the other mobile companies of the world. Apart from that, the products of apple have a status
value associated with it which has eventually made it an inelastic good over the time. Now as
per the property of the inelastic good, as the prices increases, the demand reduces
proportionately less than the increase in the price (Cosgrove and Olitsky, 2015). Therefore,
the total revenue which is the product of price and the quantity increases with the increase in
the price.
price ↑↑ *Quantity↓ =Total revenue ↑↑
Figure 4: the changes in the price and quantity of an inelastic product
(Source: developed by the learner)

Page 8 of 10
2.5 Analysis 5- Topic- Utility and budget line
Source: https://www.cultofmac.com/543495/apple-q1-iphone-sales-market-analyst-report-
cirp/
Summary: The value that Apple and its products deliver to the customers is unique and
cannot be extracted from any other products of the market. This is due to the fact that, the
products of the company uses the state of the art technology. The article also states that
customers sometimes go out of their budget in order to own an i-phone as it also provides a
social status to the owners of the market.
Analysis:
The utility is the benefit extracted from the consumption of a specific product. According to
the theory of economics, the utility of each of the products of the market is different from
each other. Apple, though its product, not only provides the state of the art technology which
keeps the users updated, it also provides a social status to the owners (Chiang and Vazquez,
2018). A possession of i-phone increases the value of the customers that also influences the
willingness to pay off the customers as well. This willingness to pay in turns increases the
prices of the apple products in the market.

Page 9 of 10
3.0 Conclusions
Therefore the paper discuses each of the microeconomic topics taking into consideration the
case of i-phone as a brand. The paper summarises and analyses the topic of the selected
articles and interprets in terms of the theories and the concepts of economics.

Page 10 of 10
Reference
Chiang, E.P. and Vazquez, J.J., 2018. Using Technology to Complete the Natural Learning
Path in a Principles of Economics Course. Journal of Economics Teaching, 2(2), pp.104-114.
Cosgrove, S.B. and Olitsky, N.H., 2015. Knowledge retention, student learning, and blended
course work: Evidence from principles of economics courses. Southern Economic
Journal, 82(2), pp.556-579.
Friedman, G., 2016. Book Review: What Every Economics Student Needs to Know, and
Doesn’t Get in the Usual Principles Text.
Goodwin, N., Harris, J.M., Nelson, J.A., Roach, B. and Torras, M., 2015. Principles of
economics in context. Routledge.
Karlan, D., 2017. Survivor: Three principles of economics lessons as taught by a reality
television show. The Journal of Economic Education, 48(3), pp.224-228.