The
article was originally taken from the Financial Review website which was
published on the 21st of September at 12:39am regarding the launching event of Apple's iPhone 5 and its sales on that day.
Apple
officially launched their iPhone 5 on the 21st of September 2012.
There were a lot of people who queued up the day before in order to get their
hands on the new gadget. With that being said, the quantity demand for an
iPhone 5 was very high as proved in the article with about six hundred people queuing
to get the gadget and each customers were limited to get a maximum of 2 phones
only. When a quantity demand increases and exceeds the quantity supply,
shortage will occur as the people who were prepared to buy the iPhone 5 was
more than what Apple had prepared to be sold on the day of their launch. A
shortage will force the price of an iPhone 5 to increase in order to meet the market
equilibrium, as the price of iPhone 5 increases, the quantity demanded for an
iPhone 5 will decrease as the people will not be able to afford it and the
quantity supplied will also increase as less people will buy the product due to
the increase of the price of the iPhone 5. Graphically, the quantity demanded
and quantity supplied will move upwards along the line in order to meet the
market equilibrium.
Unfortunately,
the iPhone 5 can be considered as a luxury good as the price of the product
decreases, the quantity demanded for iPhone 5 will increase which will also
lead to an increase in total revenue. With that being said, the elasticity of
demand of the iPhone 5 will be elastic. One of the reasons is because of the
proportion of income spent on the good. Majority of the society has spent a
large amount of their income on the iPhone 5. Hence, the larger the amount they
spend on the gadget the more elastic the demand for the gadget. In contrast,
the iPhone 4s will deem to reduce in terms of quantity demanded because most of
the customer will prefer purchasing an iPhone 5 instead of an iPhone 4s. This
will cause a surplus on the iPhone 4 whereby the quantity supplied is more than
the quantity demanded. In order to meet the market equilibrium, Apple would
have to decrease the price of iPhone 4s. This way, the quantity demand of an
iPhone 4s will increase as the price has gone down and the quantity supplied
will also decrease due to lots of people purchasing the iPhone 4s. Again,
graphically explained, the point of the quantity demand and quantity supplied will
move downwards along the line in order to meet the market equilibrium. I
predict that a black market will occur. In every production of an Apple
product, people from other countries would purchase a few units and sell them
at a higher price back in their own country as Apple has not officially
launched the product in the respective countries.
In
my opinion, the Samsung Galaxy S III by Samsung can be considered as a
substitute for iPhone 5 as they have similarities and are often being compared.
In order for the Samsung Galaxy S III to beat the iPhone 5, Samsung would have
to decrease the price of the Samsung Galaxy S III in order to attract the
customers. This will affect the elasticity of demand of the iPhone 5 as people
would think of Samsung Galaxy S III as a substitution for iPhone 5 since they
share similar features and only differs in terms of the pricing. As the price
of Samsung Galaxy S III decreases, the demand for Samsung Galaxy S III will
increase and the demand for iPhone 5 will eventually decrease. The demand curve
for Samsung Galaxy S III will shift towards the right and the demand curve for
iPhone 5 will shift to the left.
Assuming
the efficient quantity is 2 million units of iPhone 5 per day. Apple launched
the iPhone 5 with the total of 1 million units due to the restriction of
production. This will cause an underproduction and the quantity of iPhone 5
will be insufficient which will cause a deadweight loss which can also be
called as the social loss. However, if the efficient quantity is 1 million
units of iPhone 5 per day and Apple launching with 2 million units of iPhone 5
per day, over production will occur whereby the quantity of iPhone 5 is too
sufficient which will also cause a deadweight loss to occur, this loss can also
be called the social loss.
When
people are deciding whether to purchase a Samsung Galaxy S III or an iPhone 5,
an opportunity cost occurs whereby he or she will have to forego either one of
the smart phone in order to be able to purchase the other one. As an example, they
will have to forego iPhone 5 in order to be able to purchase a Samsung Galaxy S
III as they can’t afford to buy both and they do not have a necessity to buy
both phones. With this being said, most of the customer foregone their
opportunity cost of purchasing a Samsung Galaxy S III in order to purchase an
iPhone 5 on the 21st of September when they decided to queue for the
iPhone 5. Besides that, they also forgone the time used up to queue to purchase
the Apple product instead of using the time to do other things. This can also be
one of the examples that could explain the opportunity cost theory.
In
conclusion, the economics theories do play a big role in our daily lives as
almost everything that happens in our daily lives can be explain rationally
through the economics theories especially the opportunity cost theory and the
demand and supply theory. It is also known for us humans, to make an
opportunity cost almost every day as we tend to make decisions every day which
will lead us to forgo the other choice.
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