Group3

__**Group 3**__ Celine Xue Yi Lu Shuang Yuyun Sheau Shiun Ker Wei


 * Project A ||< Project A: (200 word limit)

**//1. When did the iPad first originated?//** Apple released the first iPad in April 2010 in the United States. The international release date was May 28, 2010. //**2. How is the price of iPad determined? **// The price of the iPad is determined automatically by demand and supply forces through the Price Mechanism. Demand is affected by factors like the income of consumers and their willingness to purchase the product (some people may choose the close substitutes to iPad instead.) Supply is affected by factors such as changes in cost of production. The price of the iPad has no tendency to change when market equilibrium is reached, where quantity demanded is equal to quantity supplied.  //**3. What are some of the related/associated products for iPad? How are these products related to the iPad? **// The iPad also has substitutes such as the Lenovo IdeaPad U1 Hybrid, ASUS EeePad, and Samsung Galaxy Tab. Most tablets perform the same function as the iPad with only minor differences. When demand for iPad increases, demand for substitutes decreases, and vice versa. Hence they have an inverse relationship. There are many complements to the iPad such as the Apps from the App store, iPad Smart Cover, iPad 10W USB Power, Adapter, and Apple In-Ear Headphones with, Remote and Mic. When the demand for the iPad increases, the demand for its complements increases as well. Thus they have a direct relationship. The price of the iPad is determined automatically by demand and supply forces through the Price Mechanism. Demand is affected by factors like the income of consumers and their willingness to purchase the product (some people may choose the close substitutes to iPad instead.) Supply is affected by factors such as changes in cost of production. The price of the iPad has no tendency to change when market equilibrium is reached, where quantity demanded is equal to quantity supplied. || Teacher's comments

Para 2: "their willingness to purchase the product (some people may choose the close substitutes to iPad instead.)" - You are making reference to consumer's taste and preference here ya?

Yes, the rest of the points are valid here. =) || Consumers’ perspective As there are many close substitutes for iPad- iPad 2, Samsung Galaxy Tab, Touch Pad- the demand of iPad is said to be price elastic. Since the aim of consumers is to maximize their satisfaction from the price that they are paying, and that the substitutes are rather close in terms of features and functions, the factor that decides the consumers’ choice would be price. When the price of iPad increases, consumers tend to switch to the other substitutes. Producers’ perspective Price of Samsung Galaxy Tab
 * Project B || __<span style="font-family: 'Arial','sans-serif'; font-size: 14pt;">Availability, closeness and price of substitute – Samsung Galaxy Tab __

<span style="font-family: 'Arial','sans-serif';">Due to the closeness of the substitutes, what producers can do to monopolize the market is to monitor the prices that the rival companies are selling their products at. If rival firms decide to lower the price of its products, Apple must also lower its price for iPads to keep up with the competition which draws a larger pool of consumers for its products, which in turn increases the demand for iPads and maintains its profits despite the price being lowered. This leads to a more than proportionate increase in the quantity demanded. For example, in recent months, the price of Samsung Galaxy Tab, a very close substitute to the iPad has been decreasing and hence, in order to maintain its pool of customers and to deter potential consumers from purchasing Samsung Galaxy Tab, the price of iPad has to decrease. Besides, Apple Inc. can choose to focus on their better aspects through advertisements to establish the iPad’s uniqueness in the consumers’ mind as part of their marketing strategy to make iPad more price inelastic, thus both the price and output of iPad will increase, so as the revenue.

__<span style="font-family: 'Arial','sans-serif'; font-size: 14pt;">Income- Consumers’ perspective __ <span style="font-family: 'Arial','sans-serif';">When the income of consumers increase, they will have more disposable income and hence higher purchasing power, therefore, the proportion of income spent on iPads will be decreased and they will be more willing to spend on luxury goods such as iPads. Therefore, quantity demanded for iPad will increase as more people are willing and able to afford and purchase one. Thus the profits of Apple can be maximized from the sale and they are in position to increase the price. For example, the US economy grew by 3.2% in the fourth quarter of 2010, meaning that the producers can increase the price of iPads to maximize profits as more people are willing to pay a higher price for it.

__<span style="font-family: 'Arial','sans-serif'; font-size: 14pt;">Increase in cost of production – Producer’s perspective __ <span style="font-family: 'Arial','sans-serif';">As average salaries increase, the manpower costs for the company would also rise. This causes an increase in cost of production of iPads, hence decreasing the total profits earned. Therefore, Apple can choose to increase the price of iPads to compensate for the losses incurred due to rising manpower costs. Furthermore, as the law of demand states, an increase in price of the good itself would lead to a decrease in quantity demanded, ceteris paribus, free gifts with low production costs like speakers or Bluetooth earphones can be included to attract more customers so as to prevent a drop in sales. || Para 1: So what is your point about DD being price elastic? So what about it? Also, we are looking at the market for iPad, so it will actually make more sense for you to analyse the impact on the market for iPad given the change in price of substitutes.

Para 2: Hmm.. Do Apple necessarily have to lower their prices? How about adopting non-price competition strategies such as advertising or product development? You are right about mentioning advertising. So by advertising what you are trying to influence could be consumer's taste and preference and therefore it may lead to an increase in DD as well. When prices are lowered, are you sure it increases the DD for iPad? What is wrong here? Are you looking at DD or Qty DD? Also, why is there a more than proportionate increase in Qty DD?

Para 3: Increase in income - Is this a price or non-price factor? What should it affect then? DD or Qty DD? Why are profits therefore maximised? Can't quite say whether profits are in fact maximised. You could only say whether profits will increase or otherwise. Relate to TR under c.p. assumption to explain change in profits. Would you be able to apply YED here?

Para 4: So what do you think will cause an increase the average salaries? Apple can't quite just set the price that they would like. It will still depend on market forces. Given an increase in COP, SS should actually fall and prices would actually increase just like what you have mentioned. It is not accurate to attribute an increase in price to just compensation of losses. So you are looking at complements here? Free gifts = Fall in px of complements and therefore increasing DD? When you talk about the fall in sales, you are not being specific. You are looking at counter-acting the fall in equilibrium qty right? So the increase in DD would actually increase equilibrium qty.

**Overall comments:** Valid points but you really need to be careful whether it is DD or Qty DD, SS or Qty SS. ||


 * ~ Presentation materials || [[file:iPad.pptx]]
 * ~ Presentation materials || [[file:iPad.pptx]]

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Tablet Market getting more crowded - iPad Xoom Galaxy Tab Playbook ||  ||