Question

A market consists of groups of buyers and sellers of a good or service. Market equilibrium represents the price at which the quantity of goods supplied is balanced with the quantity of goods consumers are willing and able to buy. Consider the market for iPads. What could change the quantity of iPads consumers are willing and able to purchase? Identify examples of three events since 2010 that have caused changes in the iPad market's equilibrium. For each event, decide whether the supply or demand curve shifted (or both) and in which direction. Explain how the shift could have changed the equilibrium price and quantity.

Answer 1

The three factors which can change the quantity demanded of iPad by the customers are as below:-

1:- Introduction of substitute brands:- With the development of iPad, there have been a number of other competitors which have introduced their products against iPad at a lower price. This provided the option to the customers to switch to other products. This switching of customers o competitors will result in a decline in the demand for the iPad and therefore the demand curve will shift downward causing the equilibrium price and quantity to be lower.

2:- Lower cost of production:- As the production of iPad started in China which has a lower manufacturing cost, thus the cost of production will be lowered and thus the price of iPad will decline and supply will increase and due to which the demand curve will more right while supply curve will move to downward causing as now more customers will be able to buy the product resulting the equilibrium price will decrease and quantity to increase.

3:- Change in income of the customers:- After 2010 the economy of all over the world was recovering from the recession, thus the income of the customers was limited and therefore the customers were not willing to buy greater quantity of the products resulting in a leftward shift in the demand curve causing decline in demand and thus the equilibrium price and quantity would fall.