Apple price analysis Essay

Submitted By stt993
Words: 1015
Pages: 5

a. The processes of create the good or service is consisting of different factors of production. Land, Labour, Capital and Entrepreneurship are four categories. Land is nature resources which includes land, forest, mine, river and any nature resources that is more than the narrowly definition of land is itself. Labour is summation of physical labour and mental labour belonging to human being that contribute to produce goods or service. Capital is capital goods, which is generic term of necessary instruments, machinery equipment, and factory and so on to produce other production. Meanwhile, the skills and knowledge people received by education is also called human capital. And the last one entrepreneurship is people organize land, labour and capital by manage skills. A firm applies the four factors of production to complete the processes of production. Each factor of production has different applications and indispensable in production. For example, Apple rents land and labors to produce iPhone in China, at the same time they use science and technology to update iPhone in California and also organize whole apple company by entrepreneurship. The reason why firm create the good or service is the demand of the good or service exists in market. Firms know the good or service might be consumed and they are able to make profits from it.

As consumers, the reason why purchase a good or service is that benefits to consumers and the good or services win out in comparison. For the example of Apple, people willing to purchase iPhone because of it is able to bring many functions to consumers and consumers might compare different mobile phones to determine which one should purchase. Moreover, the preference is an important reason why consumers purchase iPhone. Because many consumers are prefer to purchase iPhone as mobile phone and also which form a trend in the industry.

b. The price of related goods affects the price of a product dramatically. Related goods of a product are complements goods and substitute goods. One of these goods changes might influence the price of the product. For complements goods, which is means two kinds of product are consume together and stimulates the demand of each other. If the price of one product increases, then the demand of the product and another one might decrease. For an instance, App is a complements goods of iPhone. As shown as figure 3.11, the purchase of iPhone might drop down when the price of App growing. In this circumstance, the price of iPhone would decrease to meet demand. (Without Prison Break) For substitute goods, there is competitive relationship between two products. Which is means not only the demand of the product might decrease when the price increase and also the demand of another substitute goods might increase. Such as iPhone and Samsung, they are exactly substitute goods for each other. As shown as below, suppose the price of iPhone rises from P1 to P2 because one of the inputs rises in price. This would cause people to consume less cellphone, quantity decreases from Q1 to Q2. For the substitute good Samsung the demand curve shifts out for all price levels, from D to D’, leading to more of the substitute good consumed. As consequence, iPhone have to lower the price to enhance competitive force to meet customers.

Moreover, there are many other factors might influence the price. Such as the consumer’s income, the tastes and preference of consumers, the consumer’s expectations and the number of consumers in the market and so on. Suppose one factor the consumer’s income changed, if consumer’s income experienced a growth, the price of product would increase too. Consumers have more funds to consume and also the cost of product would rise while the increase of income, because firms have to pay more to employees. To the contrary, the price of product would decline when consumer’s income getting less. Consumers have less money to consume and firms have…