GROUP2

How is the price of iPad determined? What are some of the related/ associated products for iPad? How are these products related to the iPad?
 * ~  ||~ Student's post ||~ Teacher's comments ||
 * ProjectA || When did the iPad first originated?

iPad is the first tablet computer developed by Apple Inc. It was announced on January 27, 2010 and was first released on 3 April 2010.

As producers aim to maximize their profits, the price of iPad is determined by the producer of iPad by firstly taking into consideration the production cost of the iPads. The higher the production cost to produce a unit of iPad, the higher price of iPad. The price of substitutes like HP Slate, Blackberry Playbook and Samsung Galaxy Tab also affects the price determination of iPads. The lower the price of the substitutes, the lower the demand for iPad, thus the price of iPads should be set at a price that is reasonable so that consumers would still choose to buy iPads rather than other substitutes.

On the other hand, consumers aim to maximize t ﻿ heir satisfaction. So from the consumers’ point of view, the taste of consumers and their expectation of iPads determine how much they are willing to pay. If there is an unfavorable change in the taste of consumer for iPad, less people would naturally desire for it thus the demand for iPad would fall and the price that consumer are willing to pay for it will be lower. Similarly, if iPad do not meet up to the consumers’ expectation and thus provides minimal satisfaction, the demand and price of iPad would also drop.

How is the market price for iPad determined? Which economic framework can you bring in to explain the determination of the market price of iPad? Based on price mechanism, a process in a market economy where consumers and producers interact to determine the allocation of scarce resources between competing uses. The decisions of the producers and consumers determine the supply and demand of iPads respectively. This interaction of the demand and supply changes t he market price of iPads to reach market equilibrium where quantity demanded is equal to quantity supplied. Some products related to iPad include, applications and games for iPads, chargers, screen protectors, ear piece. These products are complements of iPad that consumers buy would either be necessity for the usage of iPads or would enhance their satisfaction when using the iPad. When the demand for iPad increases, the demand of the complements would also increase, vice versa. Good range of related products explored. What do we call these products in Economics? Are accessories and games application the only type of related products? ||  ||
 * ProjectB || Discuss how recent developments would affect your marketing and pricing decisions for the iPad. You should concentrate on four main factors, 2 from the consumer’s point of view and 2 from the producer’s point of view. Use economic tools to support your analysis.

There are several recent developments that will affect the market of iPads, they are development of substitutes, changes in taste of consumers, increase in disposable income, government legislation, complementary goods for iPads. Any recent development that might have impact the SS for iPads?

Firstly, the development of substitutes for example, Blackberry’s playbook, Samsung Galaxy Tab, Android Tablets results in more choices for consumers and creates competition for iPad1. In the near future, there is likely to be development of other high-technology computer tablets with similar functions as iPads, such as Acer tablets2. This might lead to consumers choosing the cheaper and equally competent substitutes as it is more rational to switch to alternatives, causing the demand of iPads to drop. The greater availability of substitutes also makes the demand for iPads price elastic (PED > 1). With the knowledge of the demand of iPads being price elastic, firms should lower the price of iPads in order to increase total revenue as it will lead to a more than proportionate increase in quantity demanded. Good. Your group has addressed the focus of the question. It will be good if you can incorporate some diagrammatic analysis.

However, continuous price reductions may not be a feasible method in the long run as this may result in price wars as Apple may face retaliation from rival companies. Well done for recognizing the limitations.

In the long run, firms could focus more on advertising on the unique designs and functions of iPads compared to other substitutes, carry out product development and promotion activities to establish the uniqueness of iPads in the consumer’s mind. If it is successful, the demand for iPads would be more price inelastic, and would be less affected by the substitutes. However, advertising and product development is costly, and can be detrimental to short run profits. Wow, you all even thought about the long run aspect and the impact on marketing strategy. Good job!

Next, changes in tastes of consumers, iPads have a unique design as compared to other tablets. It weighs only 601g and measures ( 9.50" x 7.31" ). Its lightweight and compact design allows users to be able to use the product more conveniently. Its attractive design further improves iPad’s marketing and popularity to consumers. Apple also did product development to try to suit the changes in taste of the consumers, for example, the development of iPad 2, which have various new features and improvement in physical appearance such as greater variety colours to make it more stylish3. The new features made iPad2 special and incomparable to the other substitutes thus consumers would still prefer iPads and demand for iPads would be less affected. How does tastes of consumers constitute recent development? You might want to focus on recent developments in changes in consumer tastes instead. What causes consumers to prefer iPads over other androids? Cite evidence and create your sources.

Moreover, iPad is considered as a form of luxury goods as it is non-essential and takes up large proportion of people’s income. Why? Justify. Hence, iPads would have a higher income elasticity of demand (YED> 1). Why highER? What are you comparing with? With an increase in disposable income of consumers4, there will be a more than proportionate increase in demand luxury goods. Hence, to maximize total revenue, it will be wiser for the producers of iPad to increase output to cope with the increasing demand. Apple can cater to the more affluent people by collaborating with other luxury brands such as Gucci and Prada to sell limited edition series of iPads. Eg? Good strategy!

Furthermore, Apple’s iPad has received a safety certification mark from Chinese regulators, putting it on a path that could see the future release of the popular tablet computer in China5. By overcoming the barriers to entry into the Chinese market, iPads have been made available in the China market. The increase in availability of iPads in the market results in an increase in demand for iPads as it is now easier to get a hold of a iPad. Apple can either choose to increase the supply of iPads to the China market as a reaction to the increase in demand for iPads or raise price to increase total revenue from the sale of iPads . . Conceptual error in the last sentence. Why would iPad want to raise price to lower Qd of iPad in China? Does it make sense?

Concluding, recent developments would cause the marketing and pricing decisions to change as a reaction to it to increase total revenue.

References: 1. [] 2. [] 3. [] (SINGAPORE), it has been shown that there is a general increase in the disposable household income, with a 23.4% increase. 4. [] 5. [] ||  ||
 * Presentation materials || [[file:Economics webquest project presentation.ppt]] || Any diagrams to further support your presentation? ||

Done by: Huang ZhiWei, Say Xian Xun, Yeo York Hao, Goh Chin Yong, Ho Hong Wei, Soon Fu Meng

Ms Quek: Overall, your report is focused and directed at addressing the intent of the question. There is also good demonstration of economic analysis. Good job! You all deserve good pat on the back!

Heres the powerpoint slides on disposable income and taste &preference:

Final slides after minor refinement...get ready for presentation...