Principle of Economics with Land Reform Taxation

SOSC107 (PCS32)

iPhone: Demand and Supply Analysis

Prelim Output

Submitted to:
Ms Chealyn Lleno

Submitted by:
Ryan Philip Detabali
Alfonso Luis Oblena
Justin Albert Garcia

25th of September, 2017

 iPhone: Supply and Demand Analysis
The iPhone is known as a line of smartphones designed by Apple Inc. It is run by an iOS
operating system and was first released on June 29, 2007. It has all the features that Android has
but with a different approach. Consumers buy the product because of its eco-friendly user interface.
Its first introduction to the market was described as a game-changer for the mobile industry.
Former Apple CEO Steve Jobs diverted the original focus from a tablet towards a phone. It had an
estimated development cost of US $150 million over the span of thirty months.
6.1 million units of the first-generation iPhone were sold over five quarters. An increase in
sales each year can be observed for each innovation in the iPhone models. At present, the iPhone
7 and 7 Plus has earned a total of 170.11 million for the first three quarters of 2017.

Figure 1 - Worldwide iPhone sales by Apples fiscal quarters (Q1 2009 Q1 2017)
Source: https://www.statista.com/statistics/263401/global-apple-iphone-sales-since-3rd-quarter-
2007/

Users are also guaranteed with the iPhone Upgrade Program which is a 24-month program
that allows consumers of the product to get the latest iPhone every year without paying the whole
price upfront. The United States were known for producing quality smartphones since the
introduction of Apple products especially the iPhones. It helped the economy of the country since
the products were being exported and localized to other countries. Expansions of the Apple
Company can be seen in our country through the approved retail stores such as PowerMac Center
and Switch. Its major success allowed the company to invade foreign countries and expand their
territory. The consistent export and import of the product helped in boosting the economy. In
return, users were also happy and contented with the product that they buy from the company.

Model Year released and active Price Range

iPhone 3GS (20092012) $99-$199
iPhone 4 (20102013) $199-$299
iPhone 4S (20112014) $199-$399
iPhone 5 (20122013) $199-$399
1iPhone 5s (20132016) $199-$399
iPhone 6 (20142016) $199-$399
iPhone 6 Plus (20142016) $299-$499
iPhone 6s (2015present) $199-$399
iPhone 6s Plus (2015present) $299-$499
iPhone SE (2016present) $399-$499
iPhone 7 (2016present) $649-$849
iPhone 7 Plus (2016present) $769-$969
iPhone 8 (2017present) $699-$849
iPhone 8 Plus (2017present) $799-$949
iPhone X (2017present) $999-???
iPhone Price History
Source: www.apple.com

In the past few years, iPhone has seen a price hike of at least 10 times more than its price
way back in 2009 with the iPhone 3gs selling at $99, while the iPhone X (10) is selling at $999.
The overwhelming demand for iPhones lead to numerous price increases to meet the supply and
demand equilibrium.

iPhone Change in Price and Demand 2009-2016

Sales (in millions)

90
80
70
60
50
40
30
20
10
0
99 199 399 649

Price (USD)
Figure 2 iPhone Change in Price and Demand
 The definition of SUPPLY, for instance, is the amount of iPhones
ready to be sold in the Apply Store. The law of supply tells that if the
price of iPhones goes up, Apple will be able to produce more units, thus
meeting the demand. Illustrated on Figure 2, we have seen the rise of
sales and as well as its price. The sales indicate a rise in demand, and for
the supply to meet with the demand, Apple must make more iPhones,
which means more productions plants and materials are needed. In the
law of supply, higher price means more supply, in relation
with that, Apple raised the price to meet the supply.
DEMAND is how many people want an iPhone at the set
price. The Law of Demand states that an increase in the price
of the product, will lead to a decrease in its demand. However,
certain products such as the iPhone continue to be demanded
even after the price was raised, this indicates a positive
feedback from the consumers.

The SUPPLY AND DEMAND CURVE is a graphical

portrayal of the connection amongst supply and demand. For
our situation, supply speaks to what number of iPhones are
made, while demand demonstrates how much the general
population need them.
EQUILIBRIUM is when
the amount of iPhones
supplied meets the demand
of the people, but this is not always the case, especially in the
iPhone market. In the market there is always a time when there
is SURPLUS. With iPhones, that means there are more made
than are being demanded. For older iPhones, like the iPhone 6s,
there are probably more surplus because the demand for it has
decreased of the release of newer models, however the production of the product was not ceased
therefore creating surplus. In Figure 1, it can be seen that in Q1, the iPhones sales are doing high
up, while in the next three quarters, sales actually came down, that was because the iPhones were
just release and most of the consumers already the phone at that time, while in Q3, there is another
iPhone release, therefore decreasing the demand for older models.

Analyst say that iPhone X unlikely to reach supply-demand balance until 2018
Source: https://www.macrumors.com/2017/09/15/kgi-iphone-x-supply-demand-balance-2018

With surplus' comes SHORTAGES. As we see everytime a new iPhone comes out, there
are so many people that want to buy it, but sometimes there is not enough to supply. This is a
shortage. When supply is less than demand. So companies must supply all the demand and return
to equilibrium. For many people this is bad. This is where
SUBSTITUTION EFFECT comes in, it is where another product is
chosen over another product for a certain reason. For iPhones, when
the supply does not meet the demand, there will be a shortage of
iPhones, and that may lead the consumers into choosing another phone
made by its competitors such as Samsungs Galaxy S8.
iPhone is generally considered as phone that is superb in quality and above other phones
in the market, its price is also generally higher than competitors. When consumers receive higher
incomes, they tend to buy things that are expensive, yet has good quality. This is called the
INCOME EFFECT.
REFERENCES:
https://www.statista.com/statistics/263401/global-apple-iphone-sales-since-3rd-quarter-
2007/
https://www.apple.com
https://www.macrumors.com/2017/09/15/kgi-iphone-x-supply-demand-balance-2018