Elasticity And Its Application: The Elasticity Of Demand In Apple
The price of Apple’s new iPhones has been recorded as the most expensive iPhone ever. Apple had been continuously raising the price of their phones whenever their new product was released. Without doubt, the release of the new iPhone with the price of $1099, has hit the highest record in Apple history. Another noticeable change in the iPhone market this year is that Apple has cut down the supply of the previous iPhone models for good, which leaves customers willing to purchase iPhones with no choice but to buy the new model, iPhone XS and XS Max. Many might wonder if customers willing to buy a new phone at such a high price will exist. However, in another prospective, says Key Banc Captial Markets’ Andy Hargreaves, Apple may be targeting the least elastic portion of the market, which is in fact aging continuously, leaving Apple with a quite steady pool of customers to rely on. This shows a very important prospect of the price elasticity of demand, which is one of the most basic and important factors in a market, since the customers Apple is planning to rely on do not quite respond to the extremely heightened price of the new model, which means that they show an inelastic demand curve. This brings Apple a chance to increase their equilibrium price and a steady demand, which may be viewed as an unusual shape in the IT market for some people.
Although by looking at this Apple may seem to be in a higher position than the customers willing to buy the product, some experts do not view the future of Apple to be so bright as it is currently. Some expect Apple’s market to be challenged within two years and its revenue to fall approximately 8 percent in 2019, since in the long term, the elasticity of customers is likely to change. This is because Apple is only relying on pushing its product’s price to maximum, rather than applying new features that differentiates its product to make it more attractive. Thus, many views that if Apple does not find a way to challenge other products in the market and continue to rely only on the loyalty of its customers, the situation is highly likely to change for Apple within a few years. This means that the currently existing pool of customers who are showing an inelastic demand curve will surely change into a pretty elastic demand curve, which would not be a positive change for Apple.
The situation that we can see in Apple is a great example which shows that the elasticity of customers can highly affect the marketing plans and price of a company’s product, and how elasticity can change in the long term if there is no significant improvement in the product no matter the loyalty to the brand itself.
