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Economics Project. Done by: Valerie, Hanan , Linus , Edward, Samantha, Cherie. How is the price of the iPad determined?. Cost to make – S$415

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Economics Project

Done by: Valerie, Hanan, Linus, Edward, Samantha, Cherie

how is the price of the ipad determined

How is the price of the iPad determined?

Cost to make – S$415

Price is determined by what the market is able and willing to pay (iPad 2nd gen. Costs the same as the 1st gen. Which shows that that is the price customers are willing to pay) and the price of their rivals eg. Samsung Galaxy Tab, Microsoft Courier, HP Slate…

when did the ipad first originated

When did the iPad first originated?

Apple's first tablet computer was the Newton MessagePad 100,introduced in 1993, which led to the creation of the ARM6 processor core with Acorn Computers. Applere-entered the mobile-computing market in 2007 with the iPhone.

when did the ipad first originated continued
When did the iPad first originated? (Continued)

Smaller than the iPad but featuring a camera and mobile phone, it pioneered the multitouch finger-sensitive touch screen interface of Apple's iOS mobile operating system. By late 2009, the iPad's release had been rumoured for several years. The iPad was announced on January 27, 2010, by Steve Jobs at an Apple press conference at the Yerba Buena Center for the Arts in San Francisco

release dates for the ipad
Release dates for the iPad
  • April 3 2010 - America
  • May 28 2010 -Australia, Canada, France, Spain, Italy, Japan, Switzerland and United Kingdom.
  • July 23 2010 – Singapore, NZ, Mexico, Austria, Holland, Ireland...
  • September 17 2010 – China
  • November 30 2010 – Malaysia, South Korea

What are some of the related/associated products for iPad? How are these products related to the iPad?

iPad keyboard dock- It is used for charging the Ipad. This includes a full-sized keyboard which allows the user to use special keys to activate ipad features. The dock has a rear dock connector port which lets you connect to an electrical outlet using the USBpower adapter ,sync to your computer and use accessories.

Ipad case – used for carrying Ipad around. Acts as a stand that holds Ipad at an ideal angle for watching videos and slide shows

3. Ipad camera connection kit – able to import photos and videos from a digital camera : using cameras, USB cable or directly from an SD card

4. Ipad dock – for syncing or charging and an audio line outportfor connecting to power speakers via an optional audio cable

5. Ipad low USB power adapter – charge Ipad directly through an electrical outlet

6. Ipad dock connector to VGA adapter – watch slide shows and movies on the big screen by connecting Ipad to a TV, monitor, projector or LCD display that uses a VGA connector

7. Apple in-ear headphones with remote and microphone–used for hearing music and adjusting volume

8. Apple composite AV cable –watch Ipad videos on a big screen with full stereo sound by connecting Ipad to the composite video and stereo audio inputs on television or home theatre system.

9. iPad apps -The iPad syncs with iTunes which sells pared down versions of Pages, Numbers, and Keynote apps in the App Store. The iPad has lots of third party applications available for it; as of September 1, 2010, there were 25,000 iPad specific apps on the App Store.

1 st view point based on the ped of ipad
1ST view point based on the PED of Ipad
  • Price Elasticity of Demand will assist the firm in selecting an appropriate pricing strategy that will help to increase total revenue. Ipad is price elastic based on the following factors.
factors affecting price elasticity of demand ped of ipad
Factors affecting Price Elasticity Of Demand(PED) of Ipad

1. Availability of substitutes?

  • Yes, Android Tablets & Acer Galaxy Tab.

2. Proportion of income spent on iPad?

  • A large proportion of income spent on Ipad , the cheapest version of the iPad, which only has Wi-Fi connectivity and 16 gigabytes of memory, costs $499 in the U.S while Acer plans to introduce an Android powered tablet in April that will likely sell for as little as $299.
factors affecting ped of ipad
Factors affecting PED of Ipad

3. Time.

  • In a long run, the price of ipad will become price elastic with more developments for alternative.
  • “Android tablets will further pare Apple’s lead in the first half of 2011, Strategy Analytics predicts. "If you were to ask me in two years time, will Apple have less than 50 percent of the global tablet market, I think that’s a certainty," Mawston said.
factors affecting ped of ipad1
Factors affecting PED of Ipad

4. Is iPad a luxury or a necessity?

  • Ipad is a luxury good, therefore, the PED is higher. It is not essential for survival thus people might reconsider buying an Ipad as the price of Ipad rises.
conclusion based on the factors affecting ped of ipad
Conclusion based on the Factors affecting PED of Ipad
  • Since the demand for Ipad is price elastic, producers should lower the price of the good in order to increase total revenue.
  • This is because a fall in the price of the good will lead to a more than proportionate increase in the quantity demanded.
  • Hence, for producers of Ipad, which is a luxury good; which has a number of substitutes; and makes up large revenue of the total expenditure should lower prices in order to increase its revenue.
2 nd view point based on the cross elasticity demand xed of ipad
2nd view point based on the Cross Elasticity Demand (XED) OF iPAD

Why use XED to base our view?

  • Because the XED of Ipad will assist Ipad producers in deciding what pricing and marketing strategies it could take in response to an action taken by a rival or complementary firm.
how the xed of ipad affects marketing and pricing decisions
How the XED of iPad affects marketing and pricing decisions?
  • If the XED for Ipad with respect to the price of Android tablet and Galaxy Tab is a high positive value (i.e close substitutes), then Ipad producers must keep an eye on pricing policy of its competitor.
  • Scenario 1: Android Tablet and Galaxy tab producers decides to lower its price to increase its sales.
  • Option 1: Ipad producers may have to lower its price just as much to ensure that its revenue is maintained.
  • Option 2: Ipad producers can adopt non-price competition to maintain its sales in response to a fall in price of Android Tablet and Galaxy tab
non price competition strategies
Non price competition strategies
  • Advertising
  • Product development [The number of online rumours about Apple's 'iPad 2' has jumped after a Chinese newspaper revealed what it claimed are details about the device. There will be two new cameras, one at the front and one rear facing plus a USB port and an improved display screen.]
  • Promotion activities which aim at establishing in the consumer’s mind the uniqueness of Ipad. [And since Apple is arguably first to this new touch-screen Web tablet market, they have to create loyalty to their version of this new device type before the others.
conclusion based on xed of ipad

Since, the Ipad is facing competition from other tablet devices, producers should:

  • Adopt non-price competition to maintain its sales in response to the lower prices of the other tablet devices using marketing strategies such as:
  • Advertising
  • Product development
  • Promotion activities which aim at establishing in the consumer’s mind the uniqueness of Ipad
conclusion based on xed of ipad1

If successful, it will increase the demand of Ipad and its price may become more price inelastic. This will cause both the price and output to rise and hence the revenue of the producers.

2. Or the Ipad producers can lower its price just as much to ensure that its revenue is maintained.

1 st point of view based on the consumer s use of the ipad
1ST point of view based on the consumer’s use of the ipad

What do consumers think of the price of Ipad?

  • Basically, consumers think that the iPad is too overpriced as it is nothing much other than a bigger version of an iphone/itouch or a smaller, more compact version of a wannabe notebook/laptop.
  • Why?
  • There are close substitutes to Ipads such as the Android tablet and Galaxy Tab. Given the closeness of substitutes and the variety of other choices in the tablet pc market, consumers are inclined to feel that the Ipad is too overpriced.
comparison of price of ipad with other e readers
Comparison of price of IPAD WITH OTHER E-Readers

From left to right: Ipad, JooJoo, Kindle, Sony Reader, IRex and Barnes&NobleNook

extract taken from kindle or ipad which will change reading
Extract taken from Kindle or iPad: Which will change reading?
  • The latest Kindle by Amazon is smaller and cheaper than previous versions but built very much along the same lines- it aims to be just an e-book reader rather than an all-purpose entertainment gadget like the Apple iPad. Amazon's strategy is to appeal to people who simply want to read without any flashy extra.
  • What's more, a quick comparison between Amazon's Kindle store and Apple's iBooks store appears to show that Amazon wins hands down on the price and availability of titles. And of course, there's a yawning gap in prices when you compare the hardware - the Kindle starts at £109, the iPad at £429
conclusion based on the consumer s use of the ipad
Conclusion based on the consumer’s use of the iPad
  • Since consumers get to choose which E-Reader to buy from a number of producersand think that the iPad is too overpriced. The producers of iPad should:
  • Lower its price of iPad to increase the sale of iPad and ensure that its revenue is maintained.
  • Marketing strategies should focus on the how an iPad is different from other E-Readers and iPhone/iPod to convince more consumers to buy their products as they would feel that the iPad is most useful to them among the rest.
  • This will help to increase the revenue of the producers as they would be able to sell more units of iPad
2 nd point of view of consumer based on the income of consumers
2nd point of view of consumer based on the income of consumers

Rising income of consumers:

  • Our economy has done exceptionally well in the past year. After two weak years in 2008 and 2009, when growth was close to zero, our GDP grew by a record 14.5% in 2010
  • The Government expects Singapore’s economy to grow by between 4% and 6% in 2011. This is still above our estimated trend growth of 3% to 5% for the next 10 years, and reflects the continuing momentum in the economy.

As we can see, Singapore’s economy is generally doing well with positive developments and this reflects the rising income levels of Singaporeans. Thus, they would be more willing and able to purchase luxury goods such as the Ipad.

conclusion based on income of consumers
Conclusion based on income of consumers
  • Therefore, as iPad producers, marketing decisions such as advertisements and promotion activities should be targeted at the working population. This is because, as the income of these consumers is rising and hence the demand for iPad will rise for them as they are more able and willing to purchase the good.