IPhone is a Luxury Product

Each year, Apple company takes a different approach when releasing new models. As known, iPhone is a luxury product that is highly demanded by customers. The advanced technology creates a strong influence on customer to buy the product for a high price.

In the article "Apple's New Strategy: Sell Pricier iPhones First" from the Wall Street Journal describes the strategy that Apple used in order to sell the pricier models first before releasing the less expensive iPhone. During this year 2018, Apple prioritized the production of iPhone XS and XS Max whose prices started at $1,000 a month before the other new model XR whose prices started at $749 for different reasons.

The main reason was to not face competition for its own new lower price iPhone. If those three models where all released at the same time, people will buy the less expensive one since all three models are advanced regardless of the different features.

Taking the price difference into account, they knew that they will sell more iPhone XR than iPhone XS and XS Max and specially during the holiday seasons. They are currently expecting a reduced demand for those new models so they want to reduce the production as well. As we learned in chapter 3, the elasticity of demand measures how much the quantity demanded responds to the change in price. In general, the demand for the iPhone is inelastic. Increasing the price for a product would usually have a large effect on the quantity demanded. Also keeping in mind, the consumers' income is very important when deciding on prices as discussed in chapter 3 regarding income elasticity.

We can always relate to supply and demand when discussing such a popular product that people are willing to pay a high price for. In chapter 2, we learned about supply and demand and the quantity demanded at a specific price. Law of demand states as the price of a good rises, the quantity of that good or service that people are willing and able to purchase during a particular period of time falls; and as the price of a good falls, the quantity of that good or service that people are willing and able to purchase during a particular period of time rises.

As we all know, Apple each year records a high demand for every product they release regardless of any problem they face. However, Apple is facing a lower demand this year specially with the three new models. When Apple released the iPhone 8 and 8 Plus, and people knew that the will be releasing the iPhone X in a short amount of time with all the new advanced features, the sale of iPhone 8 dropped down because people decided to wait. Apple had to take a different track with releasing those new 2018 models this year so they wont face the same problem again so they released the higher priced models first.

Did you like this example?

1157

48