Economics Assignment: Analysis of Apple's Market Structure and Revenue

This economics assignment analyzes Apple's market structure, focusing on its performance in the US and Asian markets. The essay examines Apple's oligopoly market structure, highlighting the demand curve's kinked nature due to varying demand elasticity. It explores the relationship between Apple's price increases and revenue, attributing success to brand value despite higher prices. The analysis delves into Apple's cost structure, illustrating how the brand enjoys supernormal profits and economies of scale in the US market, while facing diseconomies in Asia. The assignment concludes that despite reduced sales, Apple's revenue has increased, demonstrating its strong market position and potential for future growth. The essay uses figures to illustrate market structures and cost structures and references several sources for the analysis.

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Economics assignment
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Introduction:
Apple is one of the largest brand in the world that has been producing outstanding
handsets since decades. There has been legacy from the brand that it comes with newer models
every year to amaze their customers (Amatulli et al., 2017) . Though the brand is one of the
largest brand in the US market it has faced tough competition in the Asian market, where the
market is flooded with different brands. With the dipping market share of the brand with their
older version of the apple mobile, the brand has introduced its anniversary version apple x during
the year 2017, in the month of November to entice the market demand again (Angeren et al.,
2017). With the appearance of the newer model, the brand is now facing higher revenue, even
though there has been consecutive fall in the market demand. This has attracted a lot of eyes to
analyze the phenomenon for the apple in order to ensure, how the brand has really enticed the
market demand. Under this situation, this essay is aimed to analyses the market structure of the
economy and trace how the brand has performed during the recent days to enhance its revenue.
Market structure of Apple Company:
Apple is considered as one of the innovative and ever evolving brand in the world that
comes with the newer models every year in order to entice the market demand. Presently the
brand is actively operating in the US and EU market, however, with rising share of the market in
the Asian region it is penetrating the newer market too (Wellin, 2016).

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Figure 1: Oligopoly market structure of Apple
Source: (Stiglitz & Rosengard, 2015)
Figure 1 depicts the oligopoly market of the Apple, and from this, it can be seen that the
demand curve for the Apple is kinked due to the different elasticity of demand at different
market. For US market, it is inelastic region, which is the upper part of the demand curve and the
lower section is elastic region that represent the demand of the regions like china and India.
Considering the case of the US market, it can be definitely pronounced that the firm is the
market leader in the region with 44% market share that makes it inelastic good for the people of
this place. However, there are several brands operating too that makes the market an oligopoly
market. Seeing the case of the Asian market, it can be seen that the firm operates in oligopoly
market, where large number of sellers operate in the industry. China, being the largest market for
the mobile phones, has more than seven players who sells outstanding handsets. Though the
market share of the apple in the china is considerably low, it has fair amount of sale (Paniagua &

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Sapena, 2014). Considering the market scenario of the china, it can be perceived that apple has
smallest number of market share, however, it is not at all the price taker, and rather it depicts the
market price. One of the main reason of this phenomenon is the brand value. When it comes to
the India, which is the second largest electronic market in the Asia, the market is highly
competitive in nature here too.
Association between apple's price increase and revenue rise:
According to the general economic ideas, there is negative relation between the rise in the
price and revenue. According to the Posner, (2014), if the price rises, it will lead to fall in the
demand and the revenue will fall as well. However, in the case of the apple, it can be seen that
the brand has faced higher revenue with though there has been rise in the price (Basu & Bundick,
2017). According to the given article, it can be stated that, key reason for such performance lies
within the brand value, which has been ever increasing for the apple. Under this situation, though
the price of the new apple x is as high as 999$, which is higher than the average price of the
apple’s phone, it has increased the revenue for the brand (Apple sells fewer phones but profits
rise, 2018).
Apple’s cost structure:
Apple is one of the largest mobile seller in the world that has been producing outstanding
device since decades. Since the time of the Steve jobs, the brand has made its different market,
which serves the premium mobile device market (Bush et al., 2015).
As shown in the figure 2, apple is enjoying supernormal profit due to the market structure
it has been working and in addition to this, it has also been observed that there is deadweight loss
too in presence of inefficient resource allocation. Under this situation, as per the figure 2, apple

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has set its price at somewhere above the market clearing price, that has reduce the sell, however
increased the overall revenue for the firm.
Figure 2: Cost structure of Apple
Source: (Rothaermel, 2015)
Though the brand is considered as tech giant, in the world, according to the given
newspaper report, it can be seen that the brand does not produce all the parts itself. There are
various vendors that produce different device for the apple that aids the firm to achieve
operational target. Presently the firm is facing fall in the market share due to the fall in the
selling number, however the firm is having higher revenue as compared to the previous year that
entails the precarious situation of the brand (Tadeo et al. 2017). Considering the production cost,
it can be seen that the firm has been enjoying economies of scale, where the brand enjoys higher
number revenue through the lower number of the sale. In the US market, large market share has
provided it the monopoly power, where the brand has gained complete economies scale through

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its large scale operation (Hatigh et al., 2016). On the other hand, it can be seen that the brand has
been facing dis economies of scale in the Asian market, where the market share is low and the
production cost is higher too.
Conclusion:
From the above analysis it can be told that the apple is one of the largest brand in the
market which has been enticing the market demand with their outstanding device since decade.
Though the brand has been facing reduced sales, rise in the price of their products, the brand has
faced plunging revenue. The brand operates in different condition in different market that makes
it hard for the brand to operate, however, with the economies of scale it has managed the
situation to perform well in the various region over the different place, around the world. To
conclude, it can be stated that the brand has high expectation to develop in future with their large
scale of operation and higher potential.

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Reference:
Amatulli, C., De Angelis, M., Costabile, M., & Guido, G. (2017). Sustainable luxury brands:
Evidence from research and implications for managers. Springer.
Apple sells fewer phones but profits rise. (2018). BBC News. Retrieved 30 April 2018, from
http://www.bbc.com/news/business-42909989
Basu, S., & Bundick, B. (2017). Uncertainty shocks in a model of effective demand.
Econometrica, 85(3), 937-958.
Bush, J., Forstall, S., Robbin, J. L., Cue, E., Schiller, P. W., De Atley, D., ... & Gautier, P.
(2015). U.S. Patent Application No. 14/486,968.
Chan, J., Pun, N., & Selden, M. (2016). Apple, Foxconn, and China’s new working class. ILR
Press, an imprint of Cornell University Press.
den Hartigh, E., Ortt, J. R., van de Kaa, G., & Stolwijk, C. C. (2016). Platform control during
battles for market dominance: The case of Apple versus IBM in the early personal
computer industry. Technovation, 48, 4-12.
Paniagua, J., & Sapena, J. (2014). Business performance and social media: Love or hate?.
Business horizons, 57(6), 719-728.
Posner, R. A. (2014). Economic analysis of law. Wolters Kluwer Law & Business.
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
Stiglitz, J. E., & Rosengard, J. K. (2015). Economics of the Public Sector: Fourth International
Student Edition. WW Norton & Company.

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Tadeo, E., Muñiz, E., Rull, J., Yee, W. L., Aluja, M., & Lasa, R. (2017). Development of a Low-
Cost and Effective Trapping Device for Apple Maggot Fly (Diptera: Tephritidae)
Monitoring and Control in Mexican Commercial Hawthorn Groves. Journal of economic
entomology, 110(4), 1658-1667.
van Angeren, J., Podoynitsyna, K. S., & Langerak, F. (2017). Proceed with caution: Analyzing
the performance implications of the freemium business model in the Apple App Store. In
Munich Summer Institute 2017, MSI2017, 29-31 May 2017, Munich, Germany.
Wellin, M. (2016). Managing the psychological contract: Using the personal deal to increase
business performance. CRC Press.