Wednesday, 24 October 2012

iPhone 5 Sells Five Million Over the Opening Weekend

CMS WiRE online has posted an article written by Chris Knight on September 24, 2012 regarding “iPhone 5 Sells Five Million Over the Opening Weekend” on http://www.cmswire.com/cms/customer-experience/iphone-5-sells-five-million-over-the-opening-weekend-017490.php. This article is about the release of the latest model of the iPhone that has been sold over five million units across the 22 territories after a few days it has been release out to the market. Besides that, the company also announced the new release of the iPad Mini in the coming october. There has also been a release in the new operation system- iOS6 which has receive a few complaints from the users due to some application causing some flaws but overall, the new operating system is getting a positive reception.

Apple Inc, the producer of the iPhone and many other products has done it  again by releasing their latest model of the iPhone, the iPhone 5. Anticipated by many, there has been hype and queues outside the Apple stores and other retailers as millions around the world flocked to get their hands on the latest iPhone. Based on my opinion, if Apple. Inc was to increase the price of their phone then the customers would face a shortage of demand for the phone. Demand is affected by two effects, the substitution effect and the income effect. As the 'The Law of Demand' states that the higher the price of a good, the smaller is the quantity demanded. The substitution effect says that when the relative price of a good, which is their opportunity cost rises, consumers will seek other substitute for it and this will lead to a decrease in the quantity demanded of the product. For example, customers may substitude Apple products with Samsung products. The income effect is affected when consumers cannot afford to buy the goods they previously are buying anymore due to the rise in price of that good and bringing down the quantity demanded of the good. Other than that, the supply would also be affected and the factors that would influence a change in supply would be the price factor of production and technology. The price factor of production is the price used to produce a good, if the production cost increase, the minimum price that the supplier are willing to accept for each unit produced would be increased. Technology factor is advancement in technology that would lead to creation of new products which would result in lesser cost needed to produce the existing goods. All of these factors would affect Apple Inc drastically if there were a change in price of their products.

Although the new model of the iPhone has made a big sales and bring a lot profits to the company but it has a high elasticity of demand. Price elasticity is said to be the responsiveness of the quantity demanded of a certain good when there is only a change in price. As the new model of the iPhone is a phone, it has a high elasticity of demand because there are many other substitutes in the market that offer similar function to the iPhone such as Samsung GALAXY SIII or the Nokia Lumia that are both the smart phones that has been recently release to the market with similar functions as the iPhone. Thus, if Apple. Inc were to increase the price of the iPhone, consumers may choose other company’s products as they offer almost the similar functions as the iPhone.  Besides that, the other factor that may affect the price elasticity of demand is the proportion of the income spent on a good. This means that if economy crisis were to hit in the future and worker’s salary were to be cut, the proportion of their income spent on such goods like smart phones would be greatly reduced. In my opinion, smart phones such as iPhone 5 is considered as luxury goods therefore if salary were to be cut, then they would seek other options to comprehend their salaries. On the other hand, the cross elasticity of demand is a measure of the responsiveness of the demand for a good to a change in price of the substitute good or a complement good. This means that if the price of the products from the competitor of Apple Inc increase, then there would be a change in demand for the products of Apple Inc because the cross elasticity of demand for a substitute is positive.

An opportunity cost of production for a company or a firm is the sum of cost of using all the  resources to make the product. Based on my opinion, the opportunity cost of Apple Inc is getting resources from the market. To build an iPhone or and products from Apple Inc, the company need to get many different resources from the market in order to produce a good. Apple Inc needs to get resources such as computer chips and various other resources from many other companies or firms to put together an iPhone. Thus, the amount spent on resources to produce the goods is the opportunity cost of production that Apple Inc faces. In my opinion, If Apple Inc are in the long run time frame, they should increase their labor and also increase the number of  factories for production in order to obtain more profit in the future eventhough it may cost the company a big sun of money to do so. For example, Apple Inc should build more manufacturing plants and factories to increase the level of output so that they can satisfy the demand from the consumers. 

Therefore, Apple Inc should think about the change in supply and demand if they were to increase the price of their products. Besides that, they are also selling goods that are perfectly elastic in demand which consumers will choose to buy from another company if the prices of the goods have been increase because the functions of the products are similar to one another.

Author: Student ID- 1001A76785

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