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Microeconomics Article Summary Assignment - Essay Example

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Microeconomics article summary Summary Woollaston Victoria authored the article, ‘Apple shares drop by more than 5 % after new iPhone launch because investors fear the handsets- at $540 to 849- are too expensive,’ that the Daily Mail published on September 12, 2013…
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Microeconomics Article Summary Assignment
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Download file to see previous pages Prior to the fall in share price were speculations by three stock exchange experts that offered lower values for the company’s prices. Further speculations noted that the set prices for the newly launched handsets were not as low as Apple claimed, with concerns that such a price level could not attract customers into purchasing the product. iPhone 5S and iPhone 5C were the launched products that yielded the change in stock prices and the company was to stop sales of its previous model of iPhone 5 (Woollaston 1). Another major aspect of the article is claim of dishonesty against Apple as critics noted that while the company presented the product at a cheaper price of $ 99 value, the company did not disclose that this was a contract term with undisclosed monthly payment. China is one of the major markets for Apple but the high price that equals Chinese monthly average salaries may limit the company and its product’s popularity in the country. Existence of other major competitors, such as Samsung, in the Chinese market is another threat to the new product launch and its price because they contributed to loss in market control in China to firms like ‘Huawei,’ Lenovo, and Coopland. The new launch also failed to capture immediate interest in the United Kingdom because no companies offered contracts. Besides inability to capture new markets, Apple has lost market control to Samsung. Apple has also reported reduced profit margin in its second quarter though its share price has been fluctuating. The major concern to the company’s trends, as the author reports, is its inability or lack of desire to offer affordable products to its customers (Woollaston 1). Relationship between the article and course concepts Key to the article’s theme is the change in stock price of Apple following announcement of its new products, iPhone 5S and iPhone 5c and the main factor to the shift in stock prices is speculations by brokers and investors’ perception of Apple’s pricing strategy and potential market control. These factors relate to the course concepts of demand and supply with focus on demand for Apple’s stock. Demand is one of the factors that affect price and increase in demand, with other factors kept constant, leads to increase in a commodity’s prices while decrease in demand identifies with fall in prices. This explains the fall in price of Apple’s shares following announcement of release of the new product and suggest that investors lost interest in the company. Claims by investors that the company is not keen on offering competitive prices confirm this. Another major theme in the article that relates it to the course concepts of microeconomics is the demand for the company’s products into its market control and its profitability. Microeconomic principles of demand provides that price of complementary and supplementary products, people’s income, competition, and expectations dictates demand of a commodity and the article identifies all these factors. Apple’s share is a complementary commodity to the company’s product and this is evident as announcement of iPhone prices leads to reduction in share price. Prices of other phone models that are relatively cheaper have also led to un-competitiveness of Apple towards lost market control and poor profitability. Other factors to demand, based on the course concepts, are also applicable to the article and people’ ...Download file to see next pagesRead More
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