Discuss Ped, Yed and Xed Usefulness to Apple's Sales Manager
Dicuss how an understanding of price, income and cross elasticity of demand might be of practical use to the sales manager of Apple’s iPhone.
Price, income and cross elasticity of demand might be of practical use to the sales manager of Apple’s iPhones who aim to maximize sales revenue.
Price elasticity of demand (PED) measures the degree of responsiveness of quantity demanded of iPhone to a given change in the price of the good itself, ceteris paribus. Its formula is indicated by the % change in the quantity demanded of iPhone to a % change in the price of iPhone, ceteris paribus.
The demand for iPhones is price inelastic in the short run, i.e. PED<1 due to its exclusiveness and uniqueness. The initial launch of Apple’s iPhones was a massive hit, combining three products in one- a revolutionary phone, a widescreen iPod, and a breakthrough Internet device with rich HTML email and a desktop-class web browser. There are many applications available for download as well. These unique advanced features make it differentiated from the other phones. Hence Apple can increase price to maximize sales revenue since a change in price leads to a less than proportionate change in quantity demanded.
However, in the long run, demand for the iPhones will become less price elastic. This is because more close substitutes and competitors would have emerged in the market, and there could be lesser necessity of holding an iPhone. Also, consumer’s taste and preferences may have changed in the long run. After the launch of iPhones, many other hand phone makers are following Apple’s iPhone concept, launching similar multi-touch screen phones such as Blackberry Storm and Samsung Omnia. Thus the sales manager should decrease price to maximize total revenue as a change in the price leads to a more than proportionate change in quantity demanded for iPhones. Hence knowledge of PED helps the sales manager to set its price to maximize sales revenue.
Income elasticity id demand (YED) of
Price, income and cross elasticity of demand might be of practical use to the sales manager of Apple’s iPhones who aim to maximize sales revenue.
Price elasticity of demand (PED) measures the degree of responsiveness of quantity demanded of iPhone to a given change in the price of the good itself, ceteris paribus. Its formula is indicated by the % change in the quantity demanded of iPhone to a % change in the price of iPhone, ceteris paribus.
The demand for iPhones is price inelastic in the short run, i.e. PED<1 due to its exclusiveness and uniqueness. The initial launch of Apple’s iPhones was a massive hit, combining three products in one- a revolutionary phone, a widescreen iPod, and a breakthrough Internet device with rich HTML email and a desktop-class web browser. There are many applications available for download as well. These unique advanced features make it differentiated from the other phones. Hence Apple can increase price to maximize sales revenue since a change in price leads to a less than proportionate change in quantity demanded.
However, in the long run, demand for the iPhones will become less price elastic. This is because more close substitutes and competitors would have emerged in the market, and there could be lesser necessity of holding an iPhone. Also, consumer’s taste and preferences may have changed in the long run. After the launch of iPhones, many other hand phone makers are following Apple’s iPhone concept, launching similar multi-touch screen phones such as Blackberry Storm and Samsung Omnia. Thus the sales manager should decrease price to maximize total revenue as a change in the price leads to a more than proportionate change in quantity demanded for iPhones. Hence knowledge of PED helps the sales manager to set its price to maximize sales revenue.
Income elasticity id demand (YED) of