Imagine the market for tablets (e.g. iPads), with downward sloping demand curve and upward sloping supply curve.
a. Describe the market structure when iPad was introduced. In theory, how did Apple decide how much to produce and what price to charge? Describe in a simple framework, either graphically or in equations.
b. Compare the market for iPads with the market for shirts. How does a producer of simple shirts (NOT luxury shirts) set her price? Describe difference between this market structure and the one under item a.
c. How did the demand elasticity of Apple and thus its pricing power change as more providers of tables entered the market? Use graphs to illustrate.
d. How does the introduction of the iPad and tablets in general affect the market for laptops? Use again standard supply-demand graph to illustrate. What would you expect in the long- term to happen to production/producers of laptops?
e. Use the examples above on tablets and laptops to discuss the product life cycle. Use graph if necessary.
