Microeconomics Essay: Demand For IPads.

Explosion of Demand for IPADS

Discuss about the Microeconomics for Demand for IPADS.

It is known that if the cost of IPADS will decrease, then the demand and the supply for the products will be affected. In order to identify the effect of the explosion of demand for IPADs on the supply of the product and also on the price level, firstly, it is necessary to identify why the demand for IPADS has increased. In addition, it is also necessary to identify the influential factors, which affect the supply as well as the equilibrium level of price of the products.

Firstly, it can be mentioned that the consumers are highly willing to purchase the goods of Apple. The consumers, who are willing to focus on the brand or the quality of the products, they want to purchase the products. Therefore, the consumers are not concerned about the price of the products. This is the reason why the demand for the IPADS has been increasing massively (Canto, Joines & Laffer, 2014). Therefore, IPADS are assumed as the luxury goods. If the price of the products will increase, then the demand for the goods will be decreased. Therefore, if the income level of the consumers will increase then the purchase of the products will be increased.

Secondly, it can be mentioned that Apple IPADS has the competitor of Microsoft surface 2. The price of the product is comparatively higher than Apple IPADS. Therefore, the consumers are willing to purchase Apple IPADS than Microsoft Surface (Berry & Waldfogel, 2016).

Figure 1: Impact of the increase of demand of a product

(Source: Created by author)

From the above figure, it can be observed that initially the demand for IPADS is D1. After increasing the demand for the products, the equilibrium price level will be increased. The price level increased from P1 to P2. As it can be observed that Apple IPADS are considered as the luxury goods, therefore, if the demand for the goods will increase, then the price level will also be increased (Bowen & Sosa, 2014). Therefore, from the above figure it can be observed that the demand curve for the goods has increased from D1 to D2 and shift to the right ward and the price level has increased from P1 to P2.  

On the other hand, it can be stated that if the demand for the particular goods will increase, then the supply will be decreased. If the supply will decrease, then the price for the products will be increased more.

Factors affecting demand for IPADS

Figure 2: Impact of decrease in supply in the price level and the demand of the products

(Source: Created by author)

The above figure depicted that the effect of the decrease of supply curve on the price level and also on the demand for the products. From the above diagram, it can be observed that initially the equilibrium price and quantity for Apple IPADS was P1 and Q1 respectively, the initial demand curve and the supply curve intersect to each other (Cashin et al., 2014). On the other hand, when the price level increase from P1 to P2, then the demand for the goods also increase from D to D1. Therefore, new equilibrium quantity purchased by the consumers is Q2. As the products are considered as the luxury goods, therefore, the equilibrium quantity has been increased from Q1 to Q2 and shift to the rightward. In this context, it can be opined that the brand lover buyers would be able to afford this price and want to purchase the products. Therefore, equilibrium quantity of this product would be increased. However, De Grauwe (2014) opined that if the demand for the products would increase massively, then the supply for the particular product will be decreased.

As a result, the supply curve would shift to the leftward and the new supply curve is S2. Therefore, it can be inferred that the price level will be increased more and the price level is P3. In this point, it can be stated that the purchase of the products will be decreased. Therefore, the quantity will be decreased from Q2 to Q3.

Therefore, the price elasticity of luxury goods will be positive. Lastly, Baumol & Blinder (2015) mentioned that the demand for this luxury goods will be increased proportionately with the rise in income level.

References

Baumol, W. J., & Blinder, A. S. (2015). Microeconomics: Principles and policy. Cengage Learning.

Berry, S. T., & Waldfogel, J. (2016). Empirical Modeling for Economics of the Media: Consumer and Advertiser Demand, Firm Supply and Firm Entry Models for Media Markets. Handbook of Media Economics, 1.

Bowen, W. G., & Sosa, J. A. (2014). Prospects for faculty in the arts and sciences: A study of factors affecting demand and supply, 1987 to 2012. Princeton University Press.

Canto, V. A., Joines, D. H., & Laffer, A. B. (2014). Foundations of supply-side economics: Theory and evidence. Academic Press.

Cashin, P., Mohaddes, K., Raissi, M., & Raissi, M. (2014). The differential effects of oil demand and supply shocks on the global economy. Energy Economics, 44, 113-134.

De Grauwe, P. (2014). Yes, it’s the economy, stupid, but is it demand or supply? CEPS Commentary, 24 January 2014.