Themanagerial economics class has not gone in vain, but now, I canunderstand the managerial economics as the application of variouseconomic concepts and microeconomic analysis to various managerialdecisions that affect the operations of the business. In other words,it serves to bridge the gap existing between the economic theory andpractical economics (Allen et al., 2009). It was worth learning thatthe concept of managerial economics applies optimization strategyduring decision-making. It seeks to maximize the firm’s objectiveswhile minimizing constraints to achieve profitability. Such includeoperational research, mathematical programming and game theory thatare quite relevant for strategic decisions, as covered in the theoryof the firm. It is also evident that managerial economics assists inraising the analytical skills, helps in rational configuration andproviding solutions to economic problems affecting the business suchas the Apple’s firm, which is used in the analysis. Such arepossible because managerial economics uses microeconomic tools inmaking decisions that leads to profit realization by the firm.Managerial economics is also effective in non-profit organization asit enables the optimal usage of scarce resources. The paper,therefore, gives an analysis on the tools managerial economics usesto derive optimal solutions in their businesses.
Thefive demand factors that causes shifts in demand curve include buyersin the market, income level, prices of product substitutes, variationin consumer preferences, and the overall expectations of theconsumers with regard to the future prices and income (Apple Inc.,2009). The factors mentioned above can affect the prices of anycommodity in the market especially the iPad, which is a product ofApple’s Company.
Thenumber of buyers. Buyersoccupy different market places and their number affects the prices ofcommodities. For example, an increase in the number of buyers of agiven product leads to an increase in the quantity of products beingpurchased. However, in many cases, the increase in the number ofbuyers’ results into more purchases, there is likely to be a changein price (AgriculturalMarketing Guide, 2015).Price of any commodity (iPad) can fall over the years because of thebargaining power over their prices. The many buyers they have, themore power they have over the product, hence a reason as to why theprice declined irrespective of high demand. See the graph below.
Theincome level. Ineconomics, income level is a key determinant of the quantity of goodspurchased. An increase in the consumers’ income level increases thequantity of goods that are bought at a given period. With referenceto Apple’s iPad demand, the increase in the income level of thebuyers forced a demand of new iPad model with more features than theones initially introduced in the market (Sasaki, 2015). Theimplication of this is that the pressure was on the prices of thebrands that were introduced initially. In order to clear theavailable stock, their prices were to be lowered in order tostimulate the demand. This also explains why the prices of the iPadsfell despite of the high demand. As such, the existing brand of theiPads were considered as inferior goods whose consumption fall asincome rises. This pushes the demand curve to the left.
Q1 Q2 Demand
Theprices of other related products.When discussing the effect of related products with respect to thedemand of some products, it is critical to consider the followingperspectives: Firstly, the substitute products and the secondly, thecomplementary goods. As with the case of substitute products, theseare understood as goods, which can be used in place of the other. Forinstance, the introduction of smartphones caused a ripple effect onboth of the demand and price of the commodity. It makes no economicsense to charge a high price for a given commodity, yet more of themcan be sold at a reduced cost. This is because the higher the priceof a given commodity is likely to cause some of the consumers toswitch to alternatives for additional benefits. The prices of otherrelated products causes a change on the demand curve as shown below.
Thesupply factors that are known to cause changes in the price level ofproducts include the number of producers or manufacturers, the pricesof the related products, expectations of the producers, thetechnology application, and the changes in nature.
Thenumber of producers.There are many companies that are involved in the production ofiPads. Such companies include Apple, Samsung, and others. Ineconomics, an increase the number of producers means that the supplyof the same product will increase, and subsequently, causingaffecting the product prices. When many producers increase theirquantity supply into the open market, they buyers are faced withbrand preferences, and they can decide from which company they wouldwish to buy. The developing countries like China and India providemarket opportunity for companies like Samsung and Levono to selltheir lowly priced Android tablets, hence gaining a larger marketshare at the expense of Apple (Tefris Team, 2014). For example, inthe second quarter of 2013, the share market of Samsung tablet inChina rose to 11% with Apple’s share market dropping to 28% from49% (Tetris Team par.4).
Stateof technology. Thegrowing technology has an immediate effect on the pricing ofproducts. Customers want efficient products for their convenienceuse, and as such different iPad brands can be produced at differentprices and all of these are shipped to different markets. However,iPads, which are outdated by the technology, are sold at reducedprices.
rices of related products.Obviously, the prices of product are often affected by the supply ofother relates products. As with the case of demand factors, supply ofiPad is also affected by the prices offered by the related products.For instance, the supply of smartphones affected the prices of theiPads in the market. With this, the Apple must be act in the rightway of reducing the prices of iPads in order to boost the growth ofiPad sales as well as maintaining the market share. The major concernshould be to be the declining sales for the betterment. Withincreased supply of related products, the supply curve shifts to theleft.
Q1Q2 Quantity Supplied
Itis evident that the discussed concepts might not be universallyapplied in all institutions especially in military or City Hallsthough it is of great value. It is, therefore, obvious that thesupply and demand factors discussed above best explains the product’smarket. The manufacturing Companies, should formulate strategies thatensure that the falling prices are brought to normal so that both ofthe market share and growth can be ascertained.
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Allen, W.B., Weigelt, K., Doherty,N.& Mansfield, E. (2009). ManagerialEconomics Theory, Applications, and Cases,(7thEd.), Norton.
AppleInc. 2009. “Form 10-Q, Quarterly Report, Filing Date Apr 23,2009".Retrieved from: http://www.secdatabase.com.
Sasaki,N. 2015. “Building trust with IPad”. Daiwa House Industry, 2015.Retrievd from:https://www.apple.com/ipad/business/profiles/daiwahouse/
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Watson,E.2013.A closer look at some of the supply and demand factors influencingresidential property markets. ReserveBank of New Zealand Analytical Note series,2(3), 1-31.