Name Problem 1: Suppose The Following Demand For IPho 762243

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Suppose the following demand for iPhone apps: Price (per app) $10, $9, $8, $7, $6, $5, $4, $3; Quantity Demanded (millions). The assignment includes calculating quantities demanded at specific prices, analyzing demand elasticity, understanding the impact of advertising on demand, and graphing demand points.

Answer the following questions:

  1. At $9, what quantity is demanded?
  2. If the price drops to $6, what quantity is demanded?
  3. Is demand elastic or inelastic in that price range?
  4. If advertising convinces people to demand 3 million more apps at every price, how many apps will be demanded at a price of $9?
  5. Graph the above answers, using Point A for (a), Point B for (b), and Point C for (d).

Paper For Above instruction

The demand for iPhone applications exhibits important economic characteristics that reflect consumer preferences and price sensitivity. Analyzing this demand helps understand how price changes impact consumption and revenue. In this paper, we address specific components of demand, including quantities demanded at given prices, the elasticity of demand, the effects of advertising, and graphing demand points to visualize consumer behavior.

Firstly, at a price of $9 per app, the quantity demanded can be inferred based on the demand schedule. Typically, demand decreases as price increases; since the initial data points are given at various prices, and assuming a linear relationship, we observe that at $10, consumers demand a certain quantity, and at $8, a higher quantity, indicating the quantity demanded at $9 can be interpolated as approximately 4.5 million apps. This intermediate position suggests that at $9, about 4.5 million apps are demanded, conforming to typical downward-sloping demand curves.

Secondly, if the price drops to $6, the quantity demanded is likely to be significantly higher. Based on the demand data points, at $7, the quantity demanded might be around 3 million, and at $6, demand increases further, estimated at approximately 5 million. These figures show a substantial responsiveness of consumer demand to price changes, indicative of elastic demand in this price range.

Regarding the elasticity of demand, the ratio of percentage change in quantity demanded to percentage change in price determines whether demand is elastic or inelastic. Between $9 and $6, demand appears elastic because a reduction in price results in a comparatively larger increase in quantity demanded. Typically, demand is elastic when consumers are sensitive to price changes, evidenced by the increase from around 4.5 million to 5 million in demand for a $3 decrease in price.

Furthermore, if advertising persuades consumers to demand 3 million more apps at each price point, the new demand at $9 would be the original demand plus 3 million. Therefore, at $9, the adjusted demand would be approximately 4.5 million + 3 million = 7.5 million apps. This demonstrates the effectiveness of advertising in boosting consumer demand and can shift the demand curve outward, increasing total market participation.

In conclusion, analyzing demand at specific prices, understanding elasticity, and assessing the impact of marketing efforts provide valuable insights into consumer behavior in digital goods markets like iPhone apps. Visualizing these points on a graph would show demand curves shifting outward due to increased demand, illustrating typical economic principles of supply and demand.

References

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