BBS4ECO What do you think are the main determinants of the price elasticity of demand for the Apple iPhone?

Part A - Microeconomics

Article - Apple`s iPhone 11 Has a New Feature: A Lower Price By Jack Nicas and Brian X. Chen, September 10, 2019.

Q1) Why is an understanding of the price elasticity of demand important for a firm like Apple when launching a new product?

Q2) What do you think are the main determinants of the price elasticity of demand for the Apple iPhone?

Q3) According to the article, Apple launched the iPhone 11 at a price of $700. Assume sales in the first year following launch generated 10 million units in sales. In the second year, Apple reduces the price to $525 and sales that year total 14 million units. Calculate the price elasticity of demand for the iPhone 11 based on these figures. Did Apple benefit in terms of revenue from reducing prices? Explain.

Q4) Given the low barriers to entry and exit in the games industry, can Apple Arcade gain a competitive advantage over their rivals? Explain with the use of a perfectly competitive market model.

Q5) To what extent does Apple`s rebranding strategy support its brand position against competitors?

Part B - Microeconomics

Article - Mobile Roaming Charges

Q6) Describe using appropriate supply and demand diagrams, how the existence of data roaming charges affected both consumer and producer surplus in the mobile phone market.

Q7) Why do you think the European Union believed that data roaming charges was an example of market failure?

Q8) Could the European Union have used a tax or subsidy to correct the market failure in this particular case? Justify your argument.

Q9) Should mobile phone services providers have exercised social and ethical responsibility with regards to data roaming charges and not even have introduced them in the first place? Justify your argument.

Part C - Macroeconomics

Q10) Download annual UK data on consumption (real personal consumption) and real GDP (real Gross Domestic product) from 1995 until 2018 from FRED and include both in the same graph. Overlay recession bars and copy the graph into your Word document.

a) Describe the trends in the graph over time and comment on the recession periods.

b) Use the model of aggregate demand and aggregate supply to help illustrate why inflation might be expected to accelerate when economic growth is rising.

c) How might changes in aggregate supply contribute to keeping inflation subdued even if aggregate demand is rising?