jesslyn shuling jiexin wenchao

Brief introduction of iPad

iPad is originated in January 27, 2010

A line of tablet computers designed, developed and marketed by

Apple Inc

Platform for audio-visual media including movies, music

Runs the same operating system as the iPod Touch and iPhone

Can run its own applications as well as iPhone applications.

How Price of iPad is determined?

Determined by:

Consumers’ demand

Cost of production

Income of targeted consumers

Finally, the price of iPad was determined at 499 US dollars.

Consumer’s demand

An increase in demand

would raise the equilibrium

price and so, Apple Inc.

would choose to increase the

price of an iPad to gain more

profits.

E2P2

Q2

D2

Price of iPadS1

P1

Q1 Quantity of iPad

Cost of production

Increase in Cost of Production (COP) - wages, rent, interest, price of

a raw material

Holding the price of the good constant, a higher unit cost of

production would result in a lower profit per unit.

Hence, when COP of iPad increase, the producer of iPad will

increase the price of iPad to maintain their profit.

Income of targeted consumers As iPad is a normal good, income of consumers would be a

deciding factor.

An increase in income leads to an increase in the demand of

normal goods.

When demand of iPad increases, the producers would increase the

price of iPad to maximize profits.

Products associated to iPad

Complements:

iPad casing

iPad screen protector

Subsitutes:

HP Slate

Dell Streak

How these products affect the demand/quantity demanded(Qd) of iPad? Complements:

Casing and screen protector.

A fall in their price increases Qd of these goods thus an increase in

the demand for iPad and vice versa.

Substitutes:

A fall in price of substitutes will lead to a rise in Qd for those

goods but a fall in the demand of iPad and vice versa.

How recent developments would affect your marketing and pricing decisions for the

iPad?

Producer

Factor 1: Trend of tablet PCs

Increased competition in the tablet PC market

Need a competitive edge over its rival

E.g: Potential substitutes - HTC Flyer and HP slate

Emergence of substitutes would make the PED for iPad more elastic

Demand for other substitutes likely to be responsive to the change in

price of iPad.

Producer

Factor 2: Technology R&D

High degree of R&D -> more efficient method of production

Lower cost of production of iPad

Decreases selling price of iPad

More consumers rationed into the market

Profitability of each iPad would still increase

Total revenue increases

Consumer

Factor 1: Taste and preferences

Improvement in software

The launch of iPhone gained commercial success for Apple

Apple known to deliver products with consistent quality

Loyal patrons due to easily adaptable hardware

Thus iPad was highly anticipated and demanded

PED of iPad would be relatively inelastic

Increase in profits as higher dollar votes are casted

Consumer

Factor 2: Consumer income

Consumers’ growing income with improvement in world’s

economy

Purchasing power of Singaporean consumers increases

The iPad and iPad 2 are normal goods (YED > 1)

Increase in income => more than proportionate change in

quantity demanded for iPads.

Income increases, sales of iPad increase

Bibliography

Marketing Mix. (2002 - 2010). Retrieved March 18, 2011, from NetMBA Business Knowledge center: http://netmba.com/marketing/mix/

iPad - Wikipedia, the free encyclopedia. (Last modified: March 18, 2011). Retrieved March 18, 2011, from Wikipedia: http://en.wikipedia.org/wiki/Ipad

http://mashable.com/2010/01/27/9-upcoming-tablet-alternatives-to-the-apple-ipad/

http://www.straitstimes.com/BreakingNews/Singapore/Story/STIStory_645612.html

MJC economics notes.

The end.