Current Market Conditions Competitive Analysis
When it comes to Apple iPhones the elasticity or inelasticity of the price per unit does not change until a “new and better” product comes on the market. When the iPhone 5S was released to the market the demand far outweighed the supply on hand yet, the price did not change. Colander (2010) stated, “Formally, demand or supply is elastic when the percentage change in quantity is greater than the percentage change in price. Conversely, demand or supply is inelastic if the percentage change in quantity is less than the percentage change in price.” (p. 135).
The iPhone 5S®, launched by Apple on September 20, 2013, accounted for only 27 percent of all iPhones® in stock at that time, but that number tumbled as the quantity demanded rose beyond the quantity supplied. Although, the quantity supplied could meet the quantity demand at a later date as statistics of other iPhones® have shown in the past. (Whitney, 2013). Thusly, since the demand for the iPhone 5S® is high, even though the price is high, the price is inelastic because even at the given price the demand cannot be met.
Apple is continually on the cutting edge of technological advances in the cellular phone industry with better innovations to their products. The iPhone 5S® is the most recent technological advancement to the iPhone® with an improved camera, a next-gen CPU and motion tracking chip, and fingerprint sensors. Major drawbacks are that it still has the four inch screen like the original iPhones®, the fingerprint sensor only works with Apple applications at this time, the 64 bit A7 processor and the M7 motion-tracking chips do not have any “killer apps” yet, and the iOS 7 may boggle the minds of longtime iPhone users; the iPhone 5S is by far the fastest and most technologically advanced of the Apple SmartPhones® to date. (C/net.com, 2013).
The relationship between the amount of labor and capital in reference to the law of diminishing marginal productivity is; According to investopedia.com (2013), “that while increasing one input and keeping other inputs at the same level may initially increase output, further increases in that input will have a limited effect, and eventually no effect or a negative effect, on output. The law of diminishing marginal productivity helps explain why increasing production is not always the best way to increase profitability.”
There may come a time when it would, according to investopedia.com (2013), “be better to stop at a certain level; increase a different input, or produce an additional or different product or service to maximize profit.” When Apple came out with the first iPhone® it sold very well, but when Apple saw a drop in profits they came out with the next generation of the iPhone and continually modify it to remain competitive in the industry.
Statistics for select iPhone® products: iPhone 5 Sales StatisticsSales Total number of iPhone 5 units sold89,000,000 Total number of iPhone 5s units sold 6,500,000 Total number of iPhone 5c units sold2,600,000 iPhone First Day Sales StatisticsNumber Sold Number of iPhone 5 units sold in the first two months5,150,000 Number of iPhone 5 pre-orders in the first 24 hours2,000,000 Number of iPhone 4s pre-orders in the first 24 hours1,000,000 Number of iPhone 4 pre-orders in the first 24 hours600,000
Number of original iPhone pre-orders in the first 24 hours270,000 Percent of Buyers Who Were UpgradingPercent Percent of iPhone 5 buyers who upgraded from a previous iPhone83 % Percent of iPhone 4s buyers who upgraded from a previous iPhone72 % Percent of iPhone 4 buyers who upgraded from a previous iPhone77 % (statisticbrain.com, 2013).
Reference C/net.com. (2013). Same look, small screen, big potential . Retrieved from http://reviews.cnet.com/iphone-5s/ Colander, D.C. (2010). Economics (8th Edition). New York, N.Y.: McGraw-Hill/Irwin investopedia.com. (2013). 1) Law Of Diminishing Marginal Productivity . Retrieved from http://www.investopedia.com/terms/l/law-diminishing-marginal-productivity.asp statisticbrain.com. (2013). iPhone 5 Sales Statistics . Retrieved from http://www.statisticbrain.com/iphone-5-sales-statistics/ Whitney, L. (2013). 1) iPhone 5S now in even shorter supply. Retrieved from http://news.cnet.com/8301-13579_3-57609268-37/iphone-5s-now-in-even-shorter-supply-says-analyst/