Task: Imagine the market for tablets (e.g. iPads), with downward sloping demand curve and upward sloping supply curve.
Problem 1: 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.
Problem 2: 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.
Problem 3: 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.
Problem 4: 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?
Problem 5: Use the examples above on tablets and laptops to discuss the product life cycle. Use graph if necessary.