Apple Economics Essay

1269 Words Jul 9th, 2012 6 Pages
Apple Inc
University of Redlands

Abstract
Apple Inc (previously known as Apple Computers Inc) is a market leader and an iconic American company. They provide an interesting example of micro-economics as they operate in a competitive industry – high tech consumer electronics, but they have differentiated themselves so well, they operate almost like a monopoly. This paper will explore the uniqueness of Apple that makes them an economical oddity.

Company Overview
Apple Inc. (originally Apple Computers Inc.) was formed in 1977 and is a $500 billion company, employing 75,000 people worldwide. It sells consumer electronic products, software and digital content. Its primary product lines are the Macintosh, iPod, iPhone and the iPad.
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Their mission statement is “Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.” They talk about their values, not their products or features.

Pricing Strategies
This fierce loyalty has created a relatively inelastic demand structure, having similarities to a monopoly with no good substitutes -- because in the minds of loyal Apple customers, there are no suitable substitutes. Their pricing strategy is very similar to that of a monopoly. They still need to set the price to an appropriate level in order to maximize revenue; they still have a demand curve and a price at which nobody would buy the product. When Apple is deciding on a pricing strategy, their strategy will be similar to any other profit maximizing firm - to set a price which will maximize profit.
The computer industry is a monopolistic competition. Apple can gain market share by pricing its products lower, but it may be force to accept lower overall profit. According to Welkerswikinomics.com, “The goal of an imperfectly competitive firm like Apple is to increase its market power by increasing demand for its particular product through product differentiation, advertising, developing brand loyalty, and “hype”: all forms of non-price competition.”
The chart below, provided by Welkerswikinomics.com,

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