Article
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Shortage of the new iPad:
Microeconomics
is the study of decisions made by individuals and firms and how it affects the
economy. Microeconomics for individuals is focused on how to maximize their
satisfaction and utility and for firm’s minimization of costs and maximization
of profit. Here, I am going to talk about how demand and supply of the product
can influence the market. This article is about the popular brand Apple. Since,
Steve Jobs come back in 2001 Apple has been dominating the market and after the
launch of the iphone series and the Apps Store its popularity has increased
even more. People love buying Apple products as it is a well established brand,
consumers trust it and Apple never fails to live up to the expectations of its customers.
Few
months back Apple launched its latest product the new iPad. The iPad is a
popular gadget for modern users and the business world. A lot of people had placed
order for it before hand and a lot of people had to return home empty handed
because of the limited stock. Looking back, when iPad 2 was launched in 2011 it
was a big phenomenon and even weeks after the product was introduced to the
market Apple stores were selling limited
quantity of it each day as per to the stocks they had in hand. A demand arises
when a consumer wants something, is willing and able to buy it at various
prices at a particular time. Supply is quantity suppliers are willing to sell in
the market at various prices. Over demand for this product led to insufficient
supply. In this case the analysis
predict that Apple will have to face a shortage of supply of the iPad 3 which
it did because of its high demand and its new HD screen takes a lot of time to
assemble.
When
there is a shortage of a certain product in the market the suppliers are
unwilling or are not able to supply these products on time. The diagram below
shows a situation that there is an increase in demand of iPad 3 in the market.
If this is the case then invisible market forces will force to increase the
price of the good. Because there is a high demand for the product and a
shortage in the market consumers with high income will have no problem paying
extra for it. However, in this case Apple being a reputed brand has already set
a price of the new iPad 3 in the market so
the price might not rise abruptly , but if
it was some other brand or good then the under supply would have caused the
price to go up. Before, the huge craze of iPad 2 lead to a shortage but after
few months when consumer’s demands were finally met there was a surplus of
unsold stock. Because not many people were buying it invisible market forces
made the price drop. When iPad 2 was first introduced in the market the price
of the gadget was quite high but later the price then dropped to USD399 for the
simplest model.
The
supply of a product is determined by a number of factors such as input prices, technology and natural disaster. In March
2011 when iPad 2 was launched the world was going through a critical time. The
earthquake and tsunami which hit Japan caused much of the undersupply for the iPad.Japan
supplies most of the gadgets with its essential parts. Japan was unable to
supply most of iPads integral parts for instance the Flash memory, battery and
the inbuilt compass. At this point Apple was not being able to use its
resources to the maximum level and was producing lesser than it actually could
in a normal situation. I think Apple should think of an alternative way of
getting essential parts of a product if natural calamities as such happen. They
should take a lesson from this and try to become self sufficient and research
to produce the product themselves.
Furthermore,
as we all know Apple never produces cheap products. The cheapest laptop which
Apple produces is worth $999. Apple likes to be recognized as a luxury brand. I
believe that the term “luxury” is apt for Apple products as it suits the price
range and the quality. The demand for iPad 3 can be said to be positive income
elastic .As consumers' income increases their willingness and ability to buy
luxury items increases but if a consumer’s income decreases so will the ability
to buy such items decrease. This phenomenon is known as income elasticity of a
good.
In
addition, the Google tablet is much cheaper than the iPad.In my opinion for the
people who think that the battery life of the new iPad and other Apple products
are not “worth” paying a high price and people of lower income levels might fancy
this new product. If the qualities of the new tablets which are to be launched
in the future are even close to Apple it might act as a substitute for the
lower income people.
Moving
on, after the success of Apple products I believe even the demand for
accessories used for iPhones and iPads: the protective case, has increased.
People now-a-days buy fancy covers to show off their phone. It has become like
a complementary good for the Apple products.
I
think Apple can solve this problem of under supply by allocating all its resources
properly and efficiently. Producers could concentrate on one product at a time
and decrease the production and research of other gadgets which are in less
demand or have not been launched yet. This phenomenon can be showed using a PPC
which shows boundary between attainable production and unattainable production.
If it’s possible they could use most of their resources and technology to
increase the production of a good in this case the new iPad and decrease the
production of old models and research on new models like ipod touch or the mini
iPad as they might be sharing similar resources. Apple has also hired new
people in the production line to increase their productivity to meet their
demand.
In
conclusion, an undersupply of a good can cause a lot of problems in an economy
and in an individual’s life. This case further supports that people have
unlimited desires but limited resources. How a firm makes its decisions has a huge
impact on its consumers and might affect consumer’s choice and the economy in
different ways.
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