Question

Price Elasticity of Demand:

1. “Apple has dominated the high end of the smartphone market, but the company is facing increasing competition from devices running Google’s Android, which collectively outsell the iPhone. Analysts said it would make sense for Apple to introduce a cheaper iPhone.”

Infer what the analysts must have believed about the price elasticity of demand for iPhones in 2011 and why that implies a lower price could be a good business decision. Briefly explain your answer.

Answer 1

Answer - I phones make up the most expensive smartphones not in a country , but even in the whole world. The android smartphones are cheaper and also are more use friendly. Due to the cheaper phone , the demand for android increased and the i phones decreased. The analysts understood that the demand for the i phones was more elastic due to which it declined with higher price. Hence they decided to lower the price so that being elastic , the demand for the phones could be increased and more could be sold at lower price.