Business Economics Assignment # 1 Apple Watch Case Study Submitted by: Muhammad Ahmed MS IBF
ERP ID: 23212 Q1
The buyers of the smartwatches include young athletes and affluent people. Following are the three needs that are fulfilled by a smart watch:
1. Ability to monitor Health and fitness activities 2. Communication, such as sending and receiving notification and search/ social networking 3. Style and fashion
b) Who are the sellers? Identify three sellers and highlight their differentiating features
The sellers of smartwatches are Pebble, Samsung, Apple, Motorola, LG. following are the differentiating features of three sellers:
1. Pebble: Pebble smartwatches have long battery life as compared to other smartwatches, its agnostic approach to operating feature was its unique feature and it was able to connect to both Apple and android devices through Bluetooth. 2. Samsung: Samsung Gear S had was first to free itself from a phone with its own 3G and Wifi connectivity. 3. Apple: it was a great combination of technology and art, and was as per the need of what people wanted.
Q2 a) Apple watch is a consumer good because it cannot be used to produce anther consumer good or service in future.
B) Study of Apple watch is a microeconomic study as it is concerned about an individual industry and not taking about economy as a whole, it is focusing on supply and demand, and other forces that determine price levels, making it a bottom-up approach which makes it the study of microeconomics.
Q3
Assumptions year tradaitional smartwatch watch 2014 10 4 2015 9 4.5 2016 8.5 5 2017 8.1 5.3 2018 6 14 2019 5.5 19 2020 4 22
tradaitional watch 12
10
8
6 Sales tradaitional watch 4
2
0 2012 2014 2016 2018 2020 2022 year
Smartwatch 25
20
15 Sales 10 Smartwatch
5
0 2014 2015 2016 2017 2018 2019 2020 Year
Q4
Increase in price of complimentary (leftward shift in demand curve)
Decrease in price of complimentary
Improvement in attributes
Worsen attributes
Q5
a) The Quantity demanded of Apple Watch per week is the Dependent variable b) Independent variable: i) (PAW)Price of Apple watch (dollars per unit) ii) (PGEAR s) Price of the Samsung Gear S Watch iii) (PPEBBLE) Price of the Pebble steel iv) (PIPHONE6) price of the mid-range iPhone 6 smartphone v) (A) Quarterly targeted advertising budget for the Apple watch
c)
I) PAW: the sign is negative and it indicates that there is a negative(inverse) relationship between price of Apple watch and quantity demanded of Apple watch, an increase in price of Apple watch will decrease the quantity demanded Apple watch per week and vice versa. II) PGEAR S: the positive sign indicates there is a positive(direct) relationship between price of Samsung GEAR S watch and Quantity demanded of Apple watch, an increase in price of GEAR S will increase the quantity demanded of Apple watch and vice versa. III)PPEBBLE: the positive sign indicates there is a positive(direct) relationship between price of Pebble watch and Quantity demanded of Apple watch, an increase in price of Pebble will increase the quantity demanded of Apple watch Apple watch per week and vice versa. IV)PiPhone6: the sign is negative and it indicates that there is a negative(inverse) relationship between price of iPhone 6 and quantity demanded of Apple watch, an increase in price of iPhone 6 will decrease the quantity demanded Apple watch per week and vice versa. V) A: the positive sign indicates positive(direct) relation between Advertisement budget and quantity demanded of Apple watch per week, as the budget increases so do the quantity demanded of Apple watch per week and vice versa.
Q6 a
Q6 a
PAW 349
Pgears 380
Ppebble 220
Iphone 299
A 15,500
PAW 349
QAW 177,200
Q6 b
Q6b
PAW 300 310 320 349 350 360 380 390 400
Pgears 380 380 380 380 380 380 380 380 380
Ppebble 220 220 220 220 220 220 220 220 220
Iphone 299 299 299 299 299 299 299 299 299
A 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500
PAW 300 310 320 349 350 360 380 390 400
QAW 294,800 270,800 246,800 177,200 174,800 150,800 102,800 78,800 54,800
PAW 300 310 320 349 350 360 380 390 400
QAW 294,800 270,800 246,800 177,200 174,800 150,800 102,800 78,800 54,800
Q6 c
Demand curve q6c QAw D
PAw
Q6 d
Q6d
PAW 400 349 349 349 349
Pgears 380 400 380 380 380
Ppebble 220 220 150 220 220
Iphone 299 299 299 250 299
A 15,500 15,500 15,500 15,500 17,000
NEW_QAW 54,800 207,600 93,200 236,000 243,200
QAW 177,200 177,200 177,200 177,200 177,200
Q6d Xxxx i) Increase in price of AW from $349 to $400 ( Movement along the curve) ii) Increase in price of Gear S from $380 to $400 ( A rightward shift) iii) Decrease in price of Pebble from $220 to $150 (A leftward shift) iv) Decrease in price of iPhone6 from $299 to $250 (A rightward shift) v) Increase in Advertising budget from $15,500 to $ 17,000 (A rightward shift)
Q6 d Part ii
Q6 d part(ii)
PAW 300 310 320 349 350 360 380 390 400
Pgears 400 400 400 400 400 400 400 400 400
Ppebble 220 220 220 220 220 220 220 220 220
Iphone 299 299 299 299 299 299 299 299 299
A 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500
PAW 300 310 320 349 350 360 380 390 400
NEW_QAW 325,200 301,200 277,200 207,600 205,200 181,200 133,200 109,200 85,200
QAW 294,800 270,800 246,800 177,200 174,800 150,800 102,800 78,800 54,800
price of Gear S from $380 to $400
Price Do D1
QAW
Q6 d Part iii
Q6 d part(iii)
PAW 300 310 320 349 350 360 380 390 400
Pgears 380 380 380 380 380 380 380 380 380
Ppebble 150 150 150 150 150 150 150 150 150
Iphone 299 299 299 299 299 299 299 299 299
A 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500
PAW 300 310 320 349 350 360 380 390 400
NEW_QAW 210,800 186,800 162,800 93,200 90,800 66,800 18,800 - 5,200 - 29,200
QAW 294,800 270,800 246,800 177,200 174,800 150,800 102,800 78,800 54,800
price of Pebble from $220 to $150 450
400
350
Price 300 Do D1 250
200 -100,000 - 100,000 200,000 300,000 400,000 QAW
Q6d part iv
Q6 d part(iv)
PAW 300 310 320 349 350 360 380 390 400
Pgears 380 380 380 380 380 380 380 380 380
Ppebble 220 220 220 220 220 220 220 220 220
Iphone 250 250 250 250 250 250 250 250 250
A 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500
PAW 300 310 320 349 350 360 380 390 400
NEW_QAW 353,600 329,600 305,600 236,000 233,600 209,600 161,600 137,600 113,600
QAW 294,800 270,800 246,800 177,200 174,800 150,800 102,800 78,800 54,800
iPhone6 from $299 to $250 410
390
370
350
330
Price Do 310 d1 290
270
250 - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 QAW
Q6 d part v
Q6 d part(v)
PAW 300 310 320 349 350 360 380 390 400
Pgears 380 380 380 380 380 380 380 380 380
Ppebble 220 220 220 220 220 220 220 220 220
Iphone 299 299 299 299 299 299 299 299 299
A 17,000 17,000 17,000 17,000 17,000 17,000 17,000 17,000 17,000
PAW 300 310 320 349 350 360 380 390 400
NEW_QAW 360,800 336,800 312,800 243,200 240,800 216,800 168,800 144,800 120,800
QAW 294,800 270,800 246,800 177,200 174,800 150,800 102,800 78,800 54,800
Advertising budget from $15,500 to $ 17,000 410
390
370
350
330
Price Do 310 D1 290
270
250 - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 QAW
Q6 the opportunity cost is 83.70
Q7
Q7 Other supplier other priceAppletwatch suppiler(d) Apple watch (Qd) 20 10 3 16 20 13 12 30 23 8 40 33 4 50 43
Chart Title 60
40
20
0 0 5 10 15 20 25
other suppiler(d) Apple watch (Qd)
a) Other Suppliers: other supplier will enjoy as the market share of the smart watch industry would increase, thus their share would also be increased. In addition to that, the components would be easily available bringing the cost down and profits would increase. They would also be benefited from increase in price of Apple watch as their demand would increase in response. b) Healthcare Industry: the demand for healthcare industry would decrease as Smart watches would help people to keep track of their health thus the amount spent on health care would be saved. c) Society: there are several benefits that would help society to keep track of health and fitness as well as staying connected with one another but there are negative impacts too, for instance a society would become more dependent on technology and there are some privacy concerns too that firms would be accessing the personal data.
Q8 a) My friend use Apple Smart watch b) He paid 45000 to buy that watch c) His budget was within 50000 d) He gave laptop in order to buy the apple watch, he could have bought a new laptop but he decided otherwise e) He is an Apple brand lover that is why he bought the watch, he already owns Apple smartphone which the complementary good in this case, the substitute available for him was Samsung smart watch. f) Yes, he would buy when upgrade is available g) He is willing to pay any price for it as he believes that his income is going to increase in the near future and there would be no price constraints for him. h) He is confident that he could resell it for 70% of the original price. i) The opportunity cost is the 70% value that he could have earned has he resold the watch.