Arguably the leading company in technology right now is Apple. Everything they sell is extremely popular. There are lineups outside shop doors whenever there is a new product of theirs that hits stores. It is rumored that Apple will launch their newest product on October 17th; the iPad mini.
The new iPad is highly anticipated with orders reportedly at 10 million units. Experts say that the major factor that determines the success of the new iPad is the price. If the price is below $300, then great success is anticipated.
Price elasticity of demand is the responsiveness of quantity demanded to a change in price. If demand for the new iPad is as high as predicted, then the demand will be inelastic, meaning that the quantity demanded is not very responsive to a change in price. The maximum price in this case is very important because if the price exceeds $300 then the demand will be elastic or is quite responsive to a change in price and demand will be at its lowest point. It is also worth noting that unitary elasticity is the point the percentage change in quantity is exactly equal to percentage change in price, so then, total revenue does not change.
Here is a graphed example of elastic and inelastic demand of the new iPad:
To calculate elasticity we simply take the percentage change in quantity and divide it by the percentage change in price. If the elasticity is over 1, then we have elastic demand. Elasticity demand of 1 is unitary and elasticity below 1 is inelastic.
The bottom graph shows how elasticity effects total revenue. At the midpoint, revenue is at a maximum while demand is unitary. When price elasticity of demand is greater than 1, the total revenue rises. Also when price elasticity of demand is less than 1, the total revenue falls.
Durham, Jessica, Apple iPad Mini to Sell Millions, Strong Demand, Details on Release Date, Rumors, Why Price is Essential to Dominate Nexus 7, Kindle Fire 2,HD
http://www.booksnreview.com/articles/1316/20121008/apple-ipad-mini-sell-millions-strong-demand-details-release-date-rumors-why-price-essential-dominate-nexus-7-kindle-fire-2-hd.htm
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