Case Study

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2. Discuss the role that product demand played in pricing the iPhone. How did this demand influence Apple’s decision to price it high in the beginning and then lower it two months later?
Demand is the quanity of a product that will be sold in the market at various prices for a specified period. The quanity of a product that people will buy demands on its price. The higher the price, the fewer products will be sold. Conversely, the lower the price, the more products will be in demand. Apple has a loyal customer following that eagerly waits for each new product launch and be depended on to purchase the iPhone right out of the gate-regardless of the price. Apple was confident in pricing it high early on when no other company may have been able to sell a single cell phone for $599, let alone 270,000 of them within the first three days on the market. Apple has a history of successfully using premium pricing for its products. When sales of the iPhone slowed down two months after its launch, Apple realized that it may lose opportunities for holiday sales when research showed that few people were likely to spend $599 on a Christmas gift and lowered the prices by $200. Jobs stated that he was “willing to make less money to get more iPhones out there” during holiday season. The price drop was calculated to increase customer demand now that the core “Apple Nation” cutomers had already paid the higher price and demand had lowered.
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