Economics Webquest 2011 Lim Jia Hao Tan Kit Siong Ginny Tan Cheryl Seet Lim Kiang Yong

The iPad first originated on January 27, 2010 when it first announced. The first Wi-Fi model was released in the U.S. on April 3, 2010.

Substitute goods for the iPad include: Samsung Galaxy Tab HP Slate 500

Comparison of features iPadGalaxy TabHP Slate > SGD $538 SGD $799 1 GHz Apple system1.0 GHz ARM architecture Cortex A GHz Intel Atom Z MB DDR RAM512 MB RAM2 GB DDR2 RAM Comes in 16 GB, 32 GB or 64 GB 16 GB or 32 GB internal storage, with up to 32 GB microSD 64 GB 9.7” at 1024x768 display7” at 1024x600 display8.9” at 1024x600 display Apple iOS 4.3Android 2.2Windows g380 g680 g

Due to their nature as close substitutes, the XED value of these three products is likely to be a large positive value. As a result, a decrease in the price of one product will lead to an increase in quantity demanded for that particular product will increase while the demand for the substitutes will decrease.

Consumer’s point of view (1) With this knowledge, the price should therefore be decreased, as it will result in a more than proportionate change in quantity demanded since the demand for luxury goods like iPads are price elastic Consumers will buy more of the product at a lower price as quantity demanded is inversely proportional to price More consumers will be rationed into the market as they are more willing and able to buy the product when it is at a lower price As a marketing decision, the price of iPads should be decreased as it will maximise profit.

Consumer's point of view (2) Recent developments like the Singapore Budget 2011 has led to Singaporeans having more disposable income. Demand for luxury goods like iPads are income elastic, so for a given increase in income, there will be a more than proportionate increase in quantity demanded. The signalling function thus comes into play as consumers signal to producers their willingness to purchase more of the good. As a marketing decision, supply of iPads should be increased to respond to the increase in quantity demanded.

Producer’s point of view (1) Producers are profit motivated As mentioned, demand for iPads are price elastic so a decrease in price will result in a more than proportionate change in quantity demanded It would therefore be recommended for producers to decrease price as it will maximize their profit A fall in the price of iPads will also lead to a fall in the demand for products like the Galaxy Tab due to their nature as close substitutes

Producer’s point of view (2) Again, producers are profit motivated Producers can market their product using advertisements, product development and promotion activities to convince consumers that their product is better and more unique than the substitutes This will increase demand for iPads and may cause demand for iPads to become price inelastic as the iPad and other substitutes become weaker substitutes This will thus maximize profit