Jan 28 2009
Product differentiation in imperfectly competitive markets – the MacBook Wheel
Published by Jason Welker at 10:14 pm under AP Economics,Competition,Competitive Markets, Demand and Supply,Market structure,Monopoly,Non-price competition,Oligopoly,Product markets,Supply/Demand
In IB Economics, we are currently learning about how firms in imperfectly competitive markets differentiate their products in order to increase their market power and their price-making power.
In a market with a few large firms such as the laptop computer market, companies must do what they can to increase demand for their own products over those of their competitors. Apple Computer is an example of a company that has successfully differentiated its line of laptop computers in recent years, regularly improving the features of its line of MacBooks to attract consumers away from its competitors and into the world of Macs.
Last year Apple launched the MacBook Air, the lightest and thinnest laptop on the market, creating a huge buzz in the technology world and converting millions to Apple’s line of laptops. This year, Apple has launched yet another innovation in laptop computing, in the hope of once again increasing demand for its products, and making consumers think they cannot live without the sleek, shiny Apple computers. This year’s innovation? The “MacBook Wheel”… watch:
Apple Introduces Revolutionary New Laptop With No Keyboard
The goal of an imperfectly competitive firm like Apple is to increase its market power by increasing demand for its particular product through product differentiation, advertising, developing brand loyalty, and “hype”: all forms of non-price competition. If Apple were to simply charge a lower price than its competitors for its products, it would also succeed in increasing the amount of computers it sells to consumers, but may also end up accepting lower profits due to the lower prices it must sell for.
Through differentiation, which means making its products unique and attractive to consumers, Apple attempts to increase market demand for its computers, while simultaneously making demand less elastic. With higher, more inelastic demand, Apple gains price-making power over the laptop computer market, as can be seen in the graphs below, which show that after the successful launch of a new product like the MacBook wheel Apple is able to charge a higher price, produce a similar quantity, and earn greater economic profits. 
In the video, one customer says that he’d buy “buy almost anything if it’s shiny and its made by Apple”. Such statements reflect that among loyal customers, demand for Apple’s products is highly inelastic. While the firm is certainly not a monopolist in the market for laptop computers, Apple has surely succeeded to increase its market power and thus its power over prices through product differentiation, brand loyalty, and the “hype” surrounding the launch of new products like the MacBook Wheel.
Discussion questions:
- In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
- Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
- What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
About the author: Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course.
Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this authorRelated posts:
Dear Jason:
I think you are right about the concept on product differentiation, but you are wrong about mac book wheel. It is a joke by Onion New Network.
The best for you.
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Thanks, Guillermo…
I know… The blog post was written "tongue in cheek", i.e. the joke of the MacBook Wheel can still be used to illustrate the economic concept of product differentiation!
Thanks, Jason
-This message was written on a MacBook Wheel
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Apple has done a great job when it comes to differentiation since all their computers, ipods..etc have a very unique design that make them stand out from all other computer designs. This is like the example of the toothpaste section in a Chinese store in which there is so much variation that advertising is used by firms to catch the consumers eye. Due to branding toothpastes such as Colgate are more prominent.
In this case Apple uses their distinct feature, the "click-wheel" on the MacBook Wheel. The click-wheel was clearly a huge success amongst customers since "nothing is more simple than a single, giant button" as one of the promoters in the video stated. He also adds that Apple's philosophy is to create products that are simple to use. This is another advantageous aspect of the click wheel as it is easy to use, thus enabling a broader range of the public to enjoy it such as younger kids and older people. Anyways, as Mr. Welker wrote, branding is one way for a firm to increase the inelastic demand of customers to increase their prices and in turn profits.
Although Apple is not a complete monopoly, it can use other methods to increase profits such as price discrimination. This causes the producer surplus area to increase and the consumer surplus area to decrease.
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"This message was written on a MacBook Wheel"
Too funny.
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I am a huge fan of Apple, always have been. I'm always impressed with the speed in which they are able to make one of their latest products seem like an antique. For example: I got a Nano 3rd generation for my birthday last year and its already been taken over by the newer, sleeker, shiner, etc. version.
This product differentiation and timing of new releases is, in my opinion, key to Apple's success. Even though they are seemingly releasing new ipods or laptops every few months, its helping to keep the customers that are looking to replace their "antiques". Not everyone can afford, especially in these times, to buy and new version of the Ipod every time its released; however, when Joe the Plumber's mom is looking for a Christmas present for her little boy, she knows that Apple always has the lastest technology at the ready.
Its nice to see something as common as the keyboard finally being modernized. Congratulations Apple.
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The fact that mp3 players are referred to as Ipods by the teenagers shows how successfully Apple managed to increase their market share through product differentiation. Brand loyalty is so huge that consumers don't even know other mp3 player brands and stick to buying apple products. Apple is a perfect example of product differentiation and the company has been so successful that it sort of created a new market where it enjoys monopolistic power.
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At first I thought this was ridiculous, but after reading Guillermo's post I am relieved. But yes, this is a very good example on how Apple tries to differentiate their products, but it's also an example on how you can actually lose a large market share if you come out with a product differentiated in a way which makes it worse.
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The use of the macbook wheel as an example of product differentiation is very effective. The macbook wheel is definitely something out of the ordinary and IS different from other laptops. Apple has large amount market power especially when it comes to mp3 players; I think we can soon say that iPods to mp3 players will be what mp3 players once were to cd players. They have totally revolutionized products with their flashy yet simple designs and their unique style which is recurrent in their products. Furthermore, Apple has a huge amount of loyal customers; this means that should apple release something like the macbook wheel, which customers will still buy it because they trust Apple to create superb products, if not simply to test out Apple's newest laptop. Also the fact that apple constantly has newer versions of previous products makes these rivalrous products always the latest hit, meaning people will want to buy these, especially if they now have an older, outdated version
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I completely agree with Younes, even though this is fake, it can still be applied to product differentiation. Making the Macbook with only one wheel and no keyboard would be a revolutioary idea. This is a clear form of product differentiation. It would be completely different from all the other standard laptops. The ultimate goal of this is to increase demand and make it more inelastic. It becomes more inelastic because if Apple were to raise the price then consumers would still buy this for various reasons. Consumers would buy this because of its new revolutionary idea that makes it simpler than any other laptop. Everybody would want the latest apple computer, just like everybody wants an iphone. Some consumers would also buy it just beacuse they are loyal to apple, just like someone states in the video. Apple is not a monopoly since some other firms also exist in the computer market, but since they have a large percent of market share, this is possible. Infact this is exactly the reason for this product differentiation, it is to increase demand and therefore also increase market share.
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Apple always has to come out with new ideas and inventions. They do an excellent job of it as well they are always thinking of new ideas, at first it was the mp3 player, then the touch wheel and eventually the touch screen. Apple does a great job at product differentiation and advertising. A big part of apples sales comes from brand awareness and its advertising. There are a lot of different mp3 players out there, but the only company that I know makes them is Apple.
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I have to agree with christian evertz on this one, their marketting strategies are amazingly effective. Like he said, brand loyalty is a very important factor, an apple has surely established a secure root, because I also call such technology Ipods, and never mp3 player. Maybe its also just easier to say "Ipod" instead, but whatever the reason is, for most people, there is no other choice than to buy one of their products. Apple surely deserved this power over the market.
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1. In the Apple demand curve, the demand curve increases after successful product differentiation. This is because customer demand for Apple has increased as they believe that it is worth paying more for an Apple product because of differentiation.
2. Over time, Apple will stop making supernormal profits and make only normal profits. This is because their supernormal profits will attract other firms to the market. As there are no barriers to entry in a monopolistically competitive market, these firms will become a part of the market. This will increase supply and therefore reduce demand, returning the profits of all firms to normal.
3. Firms such as Apple have attempted to differentiate their products through design and advertising. New designs, such as Apple’s super light computers (or the big wheel on the MacBook Wheel!) can attract customers to products. Laptop advertisements always seem to list new features. I like to think that I would not buy a MacBook Wheel as it does not work properly. Although I have a PC and prefer PC to Mac (I am one of few!) I did buy an Apple iPod. I would not really have bought any other kind of MP3 player. I believe that this is due to effective advertising and also good design on the part of Apple—iPods work, and I know that. This makes me think that perhaps if MacBook Wheel became the standard for computers, as iPods are for MP3s, then I might buy it.
Chamonix
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1. After successful product differentiation, consumers see a real and discernable difference between the product Apple is offering as opposed to other brands. This would probably mean that Apple computers would have something that no other computer has as of yet. This would make the demand become more inelastic and the slope increase. Consumers would still be relatively interested in buying the product if the price went up, because in their opinion there is no real alternative to the Apple computer.
2. If the market for laptop computers is monopolistically competitive, then eventually Apple’s supernormal economic profits will eventually become only normal profits. If Apple wants to maintain its supernormal profits in the long-run, it will have to break out of the cycle of monopolistic competition. Therefore, it would have to provide a product that differentiates itself from other laptop computers with technology that will not be available to their competitors for some time. This will ensure their dominance in the industry.
3. One technological example that I can immediately identify as a company trying to differentiate their product is Apple with the iPhone. The market for cell phones has been fairly consistent with many different companies offering slightly different features. What Apple tried to do with their iPhone was to completely revolutionize the way phones are used by inserting many new “apps” unseen in phones before into their apparatus. Now, it is not clear the full effect of this move by Apple, but it is certainly clear that this new product has done very well and has differentiated itself from other cell phones in a drastic way, leading to supernormal profits for Apple. And, no, I don’t think I would ever buy a MacBook Wheel. Though I do love The Onion because they bring up a very good point on how far this technology will go before becoming simply ridiculous.
* Trevor Tezel *
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Chamonix,
I completely agree with your responses to the first two questions. As for your emphasis on design and advertising, I had not considered it before but these sheer factors alone may be able to create product differentiation. Many consumers can often be wooed by a well thought-out advertising campaign that can turn a mediocre and typical product into the hot new item of the season. I’m just not sure if this can maintain the long-term product differentiation needed for long-term supernormal profits. You also mention design which I think is something that can be emulated by other products unless they just develop the stigma of not being “cool.” Speaking of which, I am also a PC so you’re not alone. ? But I do have to say, I hope your last comment was made in a sarcastic manner regarding your purchase of the MacBook Wheel if it became the new thing. I know at least I’ve spent too long getting to the point where I can type fairly fast to move to a wheel….
* Trevor Tezel *
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After successful product differentiation, Apple appears to project the image that the particular product it intends to put out on the market is totally unique and unlike any existing product on the market. Whether this supposed new innovation is superficial or genuinely useful does not matter at first. This is because a good marketing campaign which enables Apple products to transcend other computer products in the eyes of its customers. As a result demand becomes more inelastic, as consumers are led to believe that Apple, and only Apple is able to provide that specific type of product, thus eliminating any viable competition, which in turn enables them to charge higher prices.
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If the market for laptop computers is indeed monopolistically competitive, then what was once supernormal profits for Apple will become normal profits in the long run as other companies copy Apple's innovation techniques. In order to break the cycle and maintain profits in the long-run, Apple must constantly innovate – and therefore invest large amounts in R&D – and create new markets and new needs for consumers, or improve vastly on an existing market so that they achieve overwhelming dominance of that industry, as with the iPod and the Mp3 player market.
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I think a way in which Apple is particularly successful at differentiating its products is by building a whole culture around its computers and entertainment products by developing a very unique and specific brand image. One thing about Apple that other companies do not have is its universal recognition. Aesthetically Apple is an iconic brand because it creates very elegant, clean, minimalist designs in very few colorways (with the exception of the iPod mini). This image is replicated across a wide variety of platforms including the design of the advertisements, the store layouts and the website. If you were to take an Apple product and smash it, it would still be recognizable as an Apple product.
Similarly, Apple caters to the creative types, although not so much so anymore, in the same way the IBM and Windows caters to office workers. Apple succeeds at product differentiation because it carves out a new niche in the market. Before Apple, there were no computers/software that specifically catered to creative individuals.
I don't think I'd ever buy a Wheel, it seems a bit silly and inefficient but I guess that is how Apple's innovation process works. I'd rather stick with a keyboard. I've noticed that the Wheel has been taken off the Apple website and no news about it has come out since mid-2009, so maybe Apple has realized its lack of actual potential.
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@Trevor,
With regards to your comment about the iPhone, I think a reason why Apple was so successful with it was because it was marketed as not a phone but 'an iPod with phone capabilities'. Apple took a lot of care to emphasize its power as a multi-media platform and communications device instead of just a phone, or even a smart phone. One way in which they highlighted this was, like you said, with the App store, allowing users to customize their iPhone with fun and useful applications in a way that no other company had ever achieved before.
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1. In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
Apple always creates products which are different to their competitors, they create their own uniqueness, which consumers are very attracted to, as it is something different. The slope would rise due to demand becoming more inelastic. As the consumers desires a apple product opposed to another brand.
2. Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
In the long term, supernormal profits would become normal profits, however Apple would have to differentiate in their products to stand out from the crowd, and create their own uniqueness to dominate the market and to continue to make supernormal profits.
3. What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
Apple and different companies over the years, have tried to bring in new technology and design to attract us. Apple uniqueness is its OS, design and simplicity. Some consumers just want to be "up to date" with the latest gadgets and technology, and then most consumers will tag along after they realize they fall behind. Personally I wouldn't by the wheel as I believe I would find it impractical. It would have been a total flop in my opinion.
@Trevor, liking the comparison with the iPhone, great example of how apple was innovative and was spot on.
@Meiling, Id agree with you the Wheel just isn't practical and I would stick to the keyboard, agreeing with your point on the marketing as the ipod with phone capibilities!
"I'm a PC" -Microsoft
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1. The slopes of the demand curve increases after successfully product differentiation by Apple because more consumers attracted to the uniqueness to Apple’s technology, and hence purchasing their products. In addition, it indicates that the PES is become less elastic. In other words, more consumers are becoming addicted to Apple products.
2. Over the long-run, the supernormal profit Apple is currently gaining gradually starts to diminish and turn into normal profits – the minimal amount of profit needed to operate the firm. Apple needs to continue effective advertisement and research and development of new techonology to attract more consumers in order to maintain its supernormal profits.
3. Some real ways Apple and its competitors have attempted to differentiate their products over the years are Macbook Air, the thinnest and lightest Apple laptop; and Windows 7, the newest Windows OS. I would NOT buy a Macbook Wheel if it were real for its slow typing speed and ridiculous predictive sentence techonology.
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Chamonix>>
Do you think consumers are fascinated by Apple's product for their illusions created by their uniqueness and effective advertisement? On the other hand, do consumers focus on the practicality of the product or the appearances of the products?
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1. The demand curve increases after a successful product because the more successful products (especially in a row) increases customer loyalty. Customers consistently see good products and begin to just assume the company in question makes good products.
2. Over time in a monopolistically competitive environment, Apple profits will fall to equilibrium with that of its competitors. The only way to maintain its profits are to distinguish itself from its competitors perhaps by advertising or superior R&D and potentially with a pure lucky break-through.
3. Some of the real ways companies like Apple have attempted to distinguish their products are by ridiculous market campaigns, and consistently claiming that there products are safer and easier to use have more support. I would of course never buy a MacBook wheel being that I have a deep and abiding hatred for all things Mac being that they charge more in effect for "support" and "compatibility" and I know how to use a computer well enough to do those things by myself. Additionally this particular product would be useless.
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@Meiling.echl.f09
Apple's strong point has always been marketing. Consistently their marketing campaigns have been more successful to the point where some of them have become cultural standards ("I'm a Mac, and I'm a PC".) Windows has never achieved this success in its campaigns, and consistently gets bad press due to accusations of monopoly. Ultimately when you buy any apple product you are very much paying for an image and pretty colors.
While their ad campaigns so successful it doesn't really matter if the product is any good. People are hooked on the Apple Mythos.
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1. In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
As Apple differentiates their products, their demand increases. The products become more appealing to the consumers. Along with this demand increase, demand becomes less elastic. Less elastic demand has a higher slope. This is why the slope increases.
2. Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
In monopolistic competition, all supernormal profits are competed away in the long run. The only way for a company to increase or maintain their profits is to create new products.
3. What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
Apple and other companies have differentiated their products by improving on old ones, such as the release of new iPod models, and by creating entirely new products, like the iPhone. Companies also put a lot of money into advertising, like with the Mac vs. PC commercials. These make Apple's product seem superior to Microsoft's, though these differences may not actually exist.
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Elijah,
Would you say that Apple concentrates specifically on making their Macs seem to operate better? I've noticed that there seems to be a sort of Mac culture, and that people seem to buy Macs because they're cool. I think this is a highly desireable form of non-price competition for a company. It could perhaps be even more effective than a superior product; why spend money to develop something better if buying what you already have is the cool thing to do?
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Another point, We can not forget that apple as well as being an operating system, is also a computer system itself, its a design. Where as Microsoft is only an operating system , and the computer system itself is build by many computer system manufacturers around the world. E.g. Sony, Packard Bell, HP etc. Which is also what I believe is part of Apples's success, is having created something unique and keeping it unique by investing more money into R&D.
@Mattea
You are right about their coolness, however the main aim of apple when they started was to provide consumers with another operating system, an option, that was better. Apple will have to continue to develop their products to maintain their uniqueness, otherwise its gets old, and people wouldn't be willing to buy it.
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1. The slope of the demand curve increases because apple is always coming up with new products to interest their customers and bring more and more people in. With the demand increase, the demand also becomes inelastic because people become more dependant on apple products rather than products from a different brand.
2. In the long-run apple's supernormal profits will become normal profits. Apple must create new products and bring new clients in if they want to increase they're profits again.
3. Apple constantly releases improvements of previous products and every six months, thy release a new product. They also put a lot of money into advertising their new products to make them appeal to the public so that they get bought. I don't think I would buy a Macbook Wheel because I don't think i could get used to typing on a touch screen and the computer finishing my sentences for me.
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1. The slope of the demand curve increases after this product differentiation because consumers are interested in new technology and are interested in the firm that releases it.
2. Assuming a monopolistically competitive market, the long-run profits for apple will always be only normal profits because supernormal profits will still always be competed away. In order to maintain supernormal profits, Apple will have to continue to innovate at a constant rate.
3. The history of attempted product differentiation in the computer industry started with laptops. When laptops were first invented by Osborne Computers (http://timesofindia.indiatimes.com/home/sunday-toi/open-space/Who-invented-the-laptop-and-which-company-first-produced-it-commercially/articleshow/991598.cms) it started the wave of new innovations in the computer industry. Since then, things like wireless mouses and flatscreens have been innovations, along with increased hardware. I would not buy the macbook wheel because it seems like it would be really annoying.
Dennis
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Masaya,
In response to your questions:
I do think that customers buy Apple because of their uniqueness and advertisement. I think that one of the especially effective things about Apple's product differentiation is that the public does a great deal of it. I am very familiar with the iPod ads featuring a silhouette listening to an iPod against a brightly colored background, but I also see people use iPods every day. My iPod came with Apple logo stickers which I have seen on everything from cars to ski helmets. Apple also has excellent product placement (Carrie Bradshaw, the protagonist of the Sex and The City TV series, uses an Apple laptop in almost every episode!) There is such intense brand loyalty to Apple that I think that consumers help to expand use of the products.
I also think that customers are drawn to the design of the products. I have to admit it: my laptop (Compaq) is not pretty. My iPod (blue Nano) is. The designers of Apple have made a very beautiful product, and people want products that look good.
Finally, I do think that consumers focus on practicality. Apple products are proven to work, and many programs such as iMovie are considered some of the best in the field.
So I think that it is for all of these reasons that people buy Apple products. However, I would say that the first–uniqueness–is the strongest factor. I think most people who bought an iPhone wanted to not just have all of the features and abilities of an iPhone, but also the statement "I own an iPhone."
Thanks for the interesting questions!
Also, Trevor, in response to your question about me saying I might buy a Wheel:
Five years ago, would you have said you would buy a cell phone with one button? Would you buy an iPhone today (or at least be happy if you got it for a gift)?
Chamonix
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1. This is because the demand becomes more price inelastic as a result of the new innovation.
2. In a monopolistically competitive market, profits are always normal in the long run. The product’s elasticity will become more elastic over time because the excitement of the new innovation would have worn out and a new product may have appeared. Apple must continue to innovate or increase advertising to keep normal profits in the long run or else a similar company would overrun them.
3. In real life, Nintendo’s DS and Sony’s PSP have continuously fought to pull ahead. The DS has a touch screen, but the PSP can access the internet, then the DS evolved to also include internet and a built in camera. These two handheld gaming systems will continue to innovate until they get the upper hand. And, uhhh… no
Jacob
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sara.echl.f09,
You and others have all been making a good observation in that Apple is constantly trying to improve. With their iPhones, they have to compete with products such as Verizon and AT&T's 3G phones. Also in regards to music they have to compete with Microsoft's Zune.
When it really comes down to it, it doesn't always come down to advertisement, it comes down to the uniqueness of the Apps each product offers. They are all essentially the same product, but some companies offers better apps than the others, which makes them better
-Jacob
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1. The slope of the demand increases after the new innovation. First because there is a demand for the new product. Customers who are fan of apple want to have the new product as quick as possible, and new customers are attracted. Secondly because with the new product, the price of old models can go down and this can be interesting for customers for whom apple has been too expensive up to that time
2. In the assumption of a monopolistic competition the profit of apple should go down over time when competitors catch up with their products. In the long run to maintain its profit, they will have to develop new products.
3. Apple and its competitors have attempted to find new features for the customers like touch screen, voice recognition, Tablet PC where you can write with a pen on the screen. The Mac Book Wheel sounds very interesting but I don’t like the look of the wheel and specially it will not give me more functions and I would take more time to type.
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Hey Jacob
I really like your example with the Nintendo DS and the PSP it is so true that these two compete very hard against each other and if one doesn’t bring a new product at least every year then they will be lost in the market.
Vica
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Jacob,
I like your comparison of the Nintendo DS and the PSP. They are just like apple and Microsoft: always competing against each other to make sure they stay on top and don't lose their place in the market.
Sara
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Hey Vica,
I like how you mentioned the tablet pc because its one of the more interesting new developments in computers and I definitely agree with you that the macbook wheel would slow me down because it seems a lot more difficult to navigate through the system than just a regular computer.
Dennis
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1.Apple invests a lot in R&D, or Research and Development, to distinguish their product from products of competing firms in such a way that it does not scare away customers and even makes it seem more attractive and advanced than competing products. With their huge marketing campaigns Apple increases the popularity of its products and thus also demand.
2.Characteristics of a monopolistic market are easy access to information and no barriers for entry to the market. Assuming the laptop market is one, then it would not be hard for new firms to enter the market and imitate Apple's technology or even come up with a better technology. In that case Apple will no longer have supernormal profits but normal profits in the long run. To avoid this Apple should research ways to differentiate their product even more from other laptops in order to increase its monopolistic power, hence increasing chances of earning supernormal profits.
3.Apple and competitors are constantly seeking new technologies with which they can impress the public more. They often seek for ways to increase the number and quality of the functions their products can perform – people like having a multifunctional phone such as the iPhone. Apple is also proud of its anti-virus systems, it is much harder to get viruses with Apple than it is with Windows. I would not buy a Macbook Wheel – I wouldn't like to know that I have learned to type for nothing. Anyhow, I do agree with Chamonix' point that people not buying the Macbook Wheel could change their minds if the product is advertised enough.
Eline
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1. In the Apple demand curve, the demand curve increases after successful product differentiation. This is because customer demand for Apple has increased as they believe that it is worth paying more for an Apple product because of differentiation.
2. In the assumption of a monopolistic competition the profit of apple should go down over time when competitors catch up with their products. In the long run to maintain its profit, they will have to develop new products.
3. In real life, Nintendo’s DS and Sony’s PSP have continuously fought to pull ahead. The DS has a touch screen, but the PSP can access the internet, then the DS evolved to also include internet and a built in camera.
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dear eline,
i think your answers are very wise and thoughtful.
laura
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Hey Vica,
I really like your point about the lower price of old Apple laptops contributing to the increase in demand. I had only considered the increased demand for the new product and not the effect this would have on older models, so thank you for bringing that up!
Eline
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In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
After successful product differentiation by apple the slope of the demand curve increases because demand increases. The number of people willing to pay the higher price for a computer increases as a macbook wheel is very expensive. The number of people buying lower priced macbook computers decreases as more people want to buy the expensive macbook wheel. This increases the slope of the demand curve.
Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
Economic profits will be competed away. Apple has to keep differentiating its product so that it can maintain a monopoly on specific areas of its market.
What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
Over the years Apple has differentiated its products by continually updating its ipods and computers. Because nothing apple creates stays as the new thing for long, people are always willing to buy new products, even if they are only slightly improved. I might be inclined to buy a macbook wheel if it were real as it as almost as dysfunctional as the macbook air i really wanted.
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Hey Eline,
I really like the way you explained the answers to all of the questions in relation to economic theory. By explaining what the characteristics of a monopolistic competition is you relate the issue of the macbook wheel really well.
You answered that the increase in the slope of the demand curve is attributed to an increase in demand. However, wouldn't that just cause the demand curve to shift?
-Issa
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After product differentiation, apple has added some unique and attractive characteristics to its products, which make consumers want the good more and care less about the price. Thus, the demand becomes less elastic.
Indeed, as in any monoplistic competitive market, in the long run, apple's profits will become only normal profits. The only way it could its supernormal profits is through making its product so different from the rest and so superior in fact, so attractive to consumers, that no other firm would be able to compete.
These types of companies are always trying to research and develop new technologies which are better than its competitors; they innovate, and create special and attractive designs which people would like; they also do lots of branding and advertising to manipulate consumers and make them believe their product is the best. No, I actually would not buy the Mac Wheel: I prefer microsoft.
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Laura,
I like your example about the Nintendo DS and PSP. It is true that nowadays one of the businesses that provide more money and have more competition is the games business: Microsoft Xbox is always competing against Sony Playstation and Nintendo Wii; they are always trying to innovate and create more realistic games and gameplay, with better graphics and more technology to attract consumers. They mainly use non-price competition.
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1.) The demand curve changes after successful differentiation. Since Apple has differentiated its product exceptionally well, the consumer demand for it has increased. Due to Apple’s differentiation, consumers can see a difference between an Apple and, say, a PC, and are willing to pay more for the Apple. Customer loyalty to Apple also makes its products more inelastic – people want them and are willing to pay for them.
2.) In the long run, Apple will return to normal profits. With its new product, Apple is enjoying supernormal profits. However, Apple’s success will draw other firms into the market (since entry is not blocked), and the profit will then become more evenly distributed among the various competitors. To maintain its supernormal profits, Apple would have to maintain technological supremacy over its competitors. If Apple differentiated its products and promoted technology that was not yet available to its competitors, people would definitely want more Apple products.
3.) I think Apple has differentiated many of its products. I associate Apple with a high standard of technology and an aesthetic appeal – I get this opinion from Apple’s differentiation. This makes me think of iPods. When Apple released them into the market, they were by far the coolest thing for months. No other product was able to defeat the iPod. Even today, I would still buy an iPod instead of any other MP3 player. This is surely thanks to the advertising and hype that Apple created for its product. If the MacBook Wheel was real, I probably would not buy it because I am not very interested in the latest technology. However, I will also add that I have my own MacBook, and I absolutely love it. If anything were to ever happen to it, I would definitely purchase the MacBook Wheel as a replacement.
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Hi Mei,
You mentioned that Apple’s products are inefficient – or that the innovation process is inefficient. I don’t really agree with you on that. Apple seems to have created some environmentally conscious products, especially with its new computers and iPods and such. Then again, I may just be falling prey to the advertising campaigns they have put on. And, in general, I really do like Macs.
Happy New Year!
Catherine
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Marcelo and other students,
The example of the Nintendo DS and PSP, its true, both of these companies Nintendo and Sony must compete by developing their portable consoles in order to gain more money and popularity. Nevertheless, if we talk about bigger consoles or products by the companies of Microsoft, Sony and Nintendo, they have a very tight competition due to the greater quality than portable products. Sony making Playstation 3 and older versions and Microsoft making Xbox 360 and older versions, both have a very tense and powerful competition; but on the other hand, Nintendo producing the Wii, has sold numerous copies of their console, due to the motion sensor, but the problem for Sony and Microsoft is that this Wii is just a demo or trial version, which is why is so cheap and has still gotten massive amount of money. The issue for these two companies is that once Nintendo brings up its actual and real version of the console both will be left behind. However, Microsoft and Wii has gotten a massive advantage since their consoles can be pirated and u can use cheap copy games, but not PS3, due to the blue ray games, which are of much better quality than the previous ones. As well Project Nathal from Microsoft will push Xbox to the skies as is the only console to have an optical motion sensor for all its games. The aims of these companies is to develop their consoles into a more realistic environment so that you feel in the game by having wireless controls, high quality graphics, surround sound and motion sensors. In addition; for instance, the new Google phone the“Nexus One”is a great competition for the iPhone since it has the same qualities but is much cheaper, which will cause to gain popularity and be bought rather than the Apple product.
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Due to the development and change Apple has obtained unique and sophisticated qualities of its products, causing consumers to desire this product not matter its price, causing the demand to become elastic. As a result of this characteristics Apple is at the top, but still has competition, so if in the long run apple doesn’t develop its products then it will lose its average profits. Both companies have great publicity to gain popularity and both develp their products just like people want them. I would rather Microsoft; I don’t really like Mac, except for iPod, so I wouldn’t buy the Mac Wheel.
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hi # Catherine.echl.f09.
i really love your explanation
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After successful product differentiation by apple the slope of the demand curve increases because demand increases. People will start buying expensive macbook wheel instead of the lower priced macbook. As a result, this increases the slope of the demand curve.
In the long run, Apple will return to normal profits. Apple will be having supernormal profits , however the disadvantage is that, this will invite other competitors as there are not blocked entry. Apple should start inventing new ideas which will draw the attention of the customers which cant be found in other compeititors.
For apple, the brand itself has invented various kinds of technology products with different designs. The software especially in the macbook, has made it different from the other computers which use microsoft or windows xp. Having a macbook would definitely be my choice.
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In the Apple demand curve graphs found in the blog posting, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
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This happens because as the apple product is more unlike other products it is categorized as another type of product unique in the market and people suddenly start buying it they consider that there are no substitutes for the apple product and thus the demand curve increases.
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Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
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If it is assumed that the laptop computers is monopolistically competitive, over time as products get similar the profits of apple may fall. If apple wishes to maintain a high level of profits over time it most constantly effectively differentiate its products from regular competition.
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What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
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Some real ways in which the competitors in the technological industry has created differences between the products is in their design, hardware, battery life, and applications already installed in the computer such as in a Mac and applications available for installation. If the Macbook wheel were real indeed I would consider on buying it, however I might need to test if first to see if it really suites my needs.
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Hey Jason,
You're right about the product differentiation by the Apple Co. is very innovative. Also that i totally agree with your argument that "the goal of an imperfectly competitive firm like Apple is to increase its market power by increasing demand for its particular product through product differentiation, advertising, developing brand loyalty, and “hype” ". Although, this hype is indeed very superficial in a way. In todays world, when people want to buy gadgets at the cheapest possible prices, Apple sells its products at a very high range(which actually does in a way help them as it's hence considered as a luxury brand) and is hence losing out on a lot on the overall market. Also that the "wheel", if it was real, will take a lot of time to get incorporated into the masses's minds and routine as typing on the qwerty keypad has been going on since ages now and as it can be seen in the video, the "wheel" is pretty slow and much harder to use. It's just similar to the wheel in the iPods, except its on a laptop. Apple does come up with product differentiations but I'm not sure if they will be able to break the market with this new design. If Apple does wish to maintain its profits in the longer run, it'll have to come up with some new and rather revolutionary and substantial designs. The slope of the demand curve increases after successful product differentiation as the demand increases due to the introduction of a new and so-called revolutionary design and technology.
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^adding to my above comment, I would like to say that if were the Wheel was real, i wouldn't buy it as it is completely unnecessary and a product of no use.
@tiffany_williams:
I agree with your point that the demand curve increases as because of product differentiation but i did not get a reason to why people will buy "expensive" laptops and not the "cheap" ones.
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1. In the Apple demand curve graphs found in the blog posting, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
What happens is that the customers become loyal to Apple and continue to buy their products, that is because the have managed to differentiate their products from other companies selling computers. With this they attract their customers with the uniqueness of their computers and in addition to this they always have the newest technology and people tend to buy the newest product. So when people buy an apple computer it is difficult to switch back to a regular PC computer because of the uniqueness of the Mac. Apple has successfully dominated the market of Mac computers, which gives them great monopoly power of the market of Macs. Therefore the slope of the demand curve increases due to this loyalty of the customers.
2. Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
Assuming that the market for laptop computers is monopolistically competitive apple much remain the firm that has something different from the other producers of computers. If they continue to have their uniqueness they will be able to maintain their profits. However because the market is monopolistically competitive it could happen that another firm will successfully differentiate their product from others and bring competition to apple. For apple to be able to maintain their profits in the long run they must continue to improve the technology of their product and always have the newest technology available for their customers, as well as continue to develop new unique models of an apple computer. They must come up with a revolutionary design for their customers to stick with apple.
3. What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a Mac Book Wheel if it were real?
Firms like Apple have successfully differentiated their products from other products of the same kind. The main reason is that their designs for the products are great and they have successfully advertised their products. Apple is always bringing new designs and always provides their customers with the newest technology, and that’s how they attract their customers. An example is Ipod, apple has almost completely dominated the market over MP3 players and we can see that just the way people talk about MP3 players, they call them Ipods. That is an example how a firm has successfully differentiated their products from other firms and get power over the market.
I would not buy a MacBook Wheel and the reason is that the typing process is way to slow and I’d prefer to stick with keyboard. The look of the computer is very appealing and it most likely has the newest technology and the idea to make something so unique is very good to attract customers. However I feel that the design must be a faster and better way of doing something not making something (like typing) slower.
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@ Trevor.echl.f09
I like your example of Iphone of how firms have tried to differentiate their products form other is very good. They have very successfully made the Iphone different from other phone and included very attractive features in it and they are always improving the features and technology. This is a good example of how firms are successful in a monopolistically competitive market.
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The slope of the demand curve increases after successful product differentiation because there is really no alternative to the “Macbook Wheel” which would increase consumer demand for that particular product (and mainly because of the fact that the product is different from other existing laptops). Therefore, consumers are willing to buy this product even at a high price as the product would be price inelastic (since there are no substitutes).
Apple would make supernormal profits for a particular amount of time until the time where other firms would come into the market and use similar idea as the Macbook wheel to make their own different product. If this happens, Apple would make normal profits due to the close substitutes for a significantly cheaper price.
When we look at this topic from all points of view, a laptop is just a laptop, which only has several purposes. However companies have tried to integrate their laptops to make it stand out more to consumers. An example would be the Ipods invented by Apple. Over the years, Apple has been releasing new and different Ipods to increase profits and attract more customers (such as the change from Ipod classics, to Ipod Nano, to Ipod Video, to Ipod touch and so on). If the MacBook wheel was real, I would not buy the product as it is just simply another “new” product that they make every month. In other words, I have no brand loyalty towards Apple even though I own some of their products. Over time I lost interest to Apple making new things and trying to make more profit.
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To: Gunnhildur Ómarsdóttir
I feel the exact same way as to all of your responses for the questions, especially how you said that nowadays people would think of Ipods as Ipods and MP3 players as Ipods. I believe I could say this the same for "Apps" on Itunes as Apps is just a short term for 'Applications' but the first thing that comes to mind for everyone would be Apple's Apps. And if we think about it, applications were in the market or on different devices long before Apple invented the Ipod touch and Iphones.
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Apple introduces newer technologies challenging the laptop industries. Also consumers are ready to buy apple laptops even at higher prices. There is inelastic demand because no other company offers a technology where there is no keyboard
If apple becomes a monopoly then in the short run it will gain supernormal profits but in the long run because of the law of diminishing returns it will eventually fall in losses.
Personally I wouldn’t buy a macbook wheel because it just seems inconvenient not to have a keyboard. There are laptop companies like Samsung who have made changes like waterproof keypads and apple which launched the thinnest laptops in the world. Also HP created the smart battery technology and ASUS has recently entered the market.
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1-after successful product differentiation the demand curve of apple increases a lot because consumers find it different and unique so demand of apple increases. Since it is a unique product people are more willing to buy it even it is too expensive when we compare it with its compatitors.
2-If we assume that, this market has a monopolistic structure, the apple would be the center and authority of the market. To stay like that in the long run, they should continue to improve their products and produce new and different things.
3-The most attractive thing that apple is used to attract consumers was to add new apps to phones or laptop which are never added and they advertised those apps very wisely even most of the apps were nonsense. I would not buy a Wheel, because I dont think its newest features are necesarry.
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@ Gunnhildur Ómarsdóttir,
I agree with you about the desingners of apple because it is one of the reasons why apple is that popular.
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1. The demand shifts to the right because of the product differentiation. Since Apple is competing in a monopolistic competition, coming out with a different version of a lab top will definitely increase demand.
2. Over time, Apples profit will go from supernormal to normal profit. In the short run, Apple will definitely make supernormal profit from the new product but if they want to keep that in the long run, Apple will have to keep coming up with new products that competitors will not have which will ensure Apple’s supernormal profits in the long run.
3. In the past Apple came out with the iphone. It was such a big hit because of the touch screen and the fact that it was an ipod and a phone combined plus much more. Since then, Apples competitors started coming out with touchscreen phones and other devices. I would buy the Mac book wheel because soon other companies will start producing similar products and eventually everyone will convert from having a keyboard to a wheel.
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@ Ashini
great comment. i also agree with you that it is an inelastic demand so the demand will certainly remain high
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Apple has been introducing a new product every year in the advancing laptop industries, it has gained reputation and trust amongst the consumers and therefore consumers are ready to pay high prices. Apple’s product differentiation is not just limited to its inner software advancements but also in its spare parts like the one in Macbook Wheel where there is no keyboard. There will be an inelastic demand for the laptop as the product differentiation will bring a change as No other laptop producing company has yet introduced the idea. If the market for laptops becomes monopolistically competitive then Apple might make economic profits over time as its product differentiation, advertising, developing brand loyalty, and “hype” will be encouraged. Also, if the product differentiation continues they might lead the technological industries by introducing various other ‘Apple Products’ in the long run. I would not want to buy a Macbook Wheel because i don’t find it appropriate to use a Portable device without a keyboard. In addition, other companies like Dell offer customer choice configurations, or Black berry laptops with its own systems and applications.
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1. The slope changes because Apple has built customer loyalty, meaning consumers will prefer Apple brand products. This preference means that even if Apple raises its prices, its loyal customers will still buy its products. Therefore a change in price will cause a proportionately smaller change in quantity demanded, a characteristic of inelastic demand. With the introduction of the MacBook Wheel, the demand for Apple's products has become more inelastic, so the slope reflects that change.
2. Others will notice the supernormal profits Apple and its competitors are making, causing them to join the market as well. This will move the demand curve for all firms to the left due to the increased variety and and decreased market share. Therefore the average revenue curve (which is the same as the demand curve) will shift to the left and may even cause a loss if it falls below the average cost curve. This cause will hence cause some firms to shut-down and leave the market, moving the demand curve and average revenue curve back to the right due to less competition. This cycle is continuous and balances out so the average revenue curve is tangential to the average cost curve. This means firms are making normal profit in the long-run.
In order to stay ahead of the rest of the market, firms must constantly innovate their product to make it higher quality than others, or increase advertising to bring in more customers.
3. In the past Apple has differentiated its products by being the first to introduce things such as apps on smart phones or video screens on iPods. I would not buy a MacBook Wheel if it were real because it seems like a real hassle to work with.
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@ Gunnhildur Ómarsdóttir
Nice idea about how we call them iPods. I had not thought about that, and it really shows how Apple has built up its reputation.
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1- The demand for the product increases because there is no close substitute to challenge Apple. The differentiated product Macbook wheel attracts the consumers by its new technology.
2- Apples will earn supernormal profits in the short run. However, it won't make supernormal profits in the long run because there are no barriers to prevent the entry of new firms in monopolistically competitive markets. The other firms may start to produce the products which are similar to Macbook wheel. Continuing to design its differentiated products and having consumers who are loyal to the brand may help Apple to earn supernormal profits in the long run.
3- Apple and its competitors try to have different operation systems, softwares and applications to differentiate their product in order to gain more power in the market i.e the power to charge high price. I would buy it because most of the time Apple's products have high quality.
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@Ashini I agree that the demand for some Apple products are inelastic. Some products of Apple with high prices might get sold easily. This is mainly due to the consumers who are loyal to the brand.
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1) The demand curve for Apple has increased because the new product is differentiated from the others in the computer market. New technology that used in the MacBook Wheel attracted the consumers and becuase it is unique for now and the first sample of computer without key-board it is taking more and more attention which is making the demand increase.
2) The economic profits will increase during the times when the MacBook Wheel has just placed in the market. This time will take a short term, short-run because after sometime consumers get use to this product and also there can be some new computers created by the other firms in the market. To continue with a increasing profit, long-run, Apple should create new things after some certain times.
3) For example markets for computers is a very suitable market for making,creating new products. With the help of technology they are differentiating their products like Apple did. No keyboard just a big buton, so creative and interesting. Actually I would buy it becuase it looks modern, different and the quality of Apple’s products are high which makes it more desirable.
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To: Mattea.echl.f09
I agree with the all answers you gave to the questions and actually I really like that you have mentioned about the advertisements in the third question. I also think that advertisement are so beneficial for markets for introducing their new product to the consumers and also which increases selling.
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1.) The slopes of the demand curve increases after successful product differentiation by Apple because the differentiation caused an increase in the consumer demand. Consumers will be more attracted to buy from Apple because they prefer the brand over others and they will have loyalty to the company, so they would demand their products more even if they have to pay more.
2.) What is likely to happen to apple’s economic profits over time is that they will return to normal profits. Other firms will join the market because they will be attracted to the supernormal profits that apple is making. This will cause apple to respond by creating more new products with new technological features that will attract more customers.
3.) Firms like apple have differentiated their products through branding and advertising. They have built consumer loyalty with people who have purchased their products and they have repaid them buy continuing to make new compatible apple products and features, like apples’ itunes, that will attract more consumers to the apple brand. I would buy the Macbook wheel if it was real because apple has a reputation of coming out with new, fun devices and I already have an ipod so I would be inclined to buy the macbook wheel because I like my ipod touch so I will be confident that the wheelbook will be a success as well.
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@william_overhauser: I agree with your comment. I too think that " has built customer loyalty, meaning consumers will prefer Apple brand products. This preference means that even if Apple raises its prices, its loyal customers will still buy its products." I think that apple has been able to create such a successful reputation through their branding that when people are faced with choices over a certain product, they would be more inclined to purchase the apple brand because of their loyalty to apple and the reputation apple has for making successful products.
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1)The demand curve changes after successful differentiation since Macbook whell has different technology it is more appealing to the consumers.
2) at the first stage; when Macbook wheel just enter the markets the economic profits will increase. the other brands can produce the similiar computer so economic profits are going to be decreased, after sometime consumers get use to this product.to continue with a increasing profit, long-run, Apple should create new things after some certain times.
3) the competitors in the technological industry has created differences between the products is in their design, hardware, battery life, and applications already installed in the computer such as in a Mac and applications available for installation. ? wouldn't buy since it would take more time to type, ? prefer usual keyboard.
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@dilan_gunes
you are right in your answers furthermore ? completely agree with you that quality of Apple's products are high.
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1. As Apple increases product differentiation, they increase the demand for their specific products and make people believe that their products are a necessity. This increases the inelasticity of the price, making the demand curve more steeply sloped.
2. In the short run, Apple will make supernormal profits. This will, however, attract more firms to the market, increasing competition and shifting the demand curves for the products of each firm to the left. Because of this, Apple can make only normal profits in the long run.
3. Apple differentiates its products through all the hype and advertising, such as with the way “iPod” has become almost synonymous with “mp3 player.” Blackberry has differentiated its cell phones by making them well known for long batter life.
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@gokce: I like how you brought up the installation options in your answer to the third question. The major operating system providers have a lot of options specific to them, so if you want that option than you are forced to buy their product — it's another way that companies differentiate their products.
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1. The slope of the demand curve increases after there is a successful product differentiation. This is due to the fact that people will demand the product more, because it has become more desirable due to advertising etc. This allows the firm to make supernormal profits in the short run.
2. Apple's profits over time will be normal profits. This is because if they are making supernormal profits, it will attract other firms (or current firms to make a similar innovation) in turn decreasing demand (because of close substitutes), bringing their profits down to normal profits. If they want to maintain supernormal profits in the long run, they need to stay innovative. Always making their products the most desirable.
3. Some ways that companies have differentiated their products from the other companies is through branding. For example, Apple has the signature bitten apple, Dell has the word "dell" with the tilted e surrounded by a circle, etc. This allows people to instantly recognize their products when people are using them. No, I would not buy a MacBook Wheel, if it were real. It is lacking extremely in features, and seems like it'd be hard to use. Also, there are many better alternatives out there.
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@Mehmet_Mert_Suma: For your question 3, I feel that the quality of Apple's products in the past should not automatically mean you'd be willing to buy anything that Apple would come out with. From the video, at least in my opinion, it seemed like it was barely functional. It is the consumer's job to make informed decisions about products.
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1) As we see from the video Apple has a very inelastic demand portfolio. Apple creates even more inelastic demand by differentiation its Apple Mac. So that the slopes of the demand curves increase even if the price of the product more than the other laptops. Also the differences that the new MacBook Wheel has, attract consumers who are already addicted to Apple’s all products.
2) I think, if we consider the market for laptop is monopolistically competitive then in the long run Apple’s supernormal profits may become only normal profits. Because in monopolistic competition there are new barriers to enter the market for the other firms which can compete with Apple. But as Apple can easily produce new things and differentiate its products which can appeal consumers, Apple may make supernormal profits in the long run by its clever strategies.
3) I think market for computers is a very good area to differentiate products. For example Apple does not only differentiate its computers, it also improves its softwares and applications for their MacBooks to make it more appealing. By these ways Apple make more profits and make their costumers even more addicted to their products. I could buy it, as it has high quality and reliable place in the market for me.
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@Ozge_Elif_Ozer I agree with most of your opinions Özge. I also think that if the market is monopolistic, Apple could be in the center of the market as it is almost leading the market about laptop sector.
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1) With the help of power and reputation, which Apple has gained in the computer market, the consumers are willing to buy products of Apple. They are more into the products so that the demand for it increased with the success.
2) If Apple keeps producing new and attractive products, the reputation and brand loyalty of it will increase. More profit may be a consequence of this situation but as it develops, the other computer companies will improve their products, as well. That is why, the profit, which Apple is going to make, will not the same as it did. If it wants to keep the profits, the advertising and more qualified products will make it less demanding.
3) Basically, the companies differentiate the applications and the programs which the computers have. The programs and the applications become more functional and trouble-free to apply. Also, the other thing is to change the appearances of the computers. Day by day, the laptops began to be thinner and smaller, and to have catchy colors and designs. I would buy the MacBook because I think it is high qualified.
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@Asucan_Odcikin I agree with your second answer that Apple has some clever ideas to make the product more appealing so that it can easily make profits.
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1. The demand curve increases after the successful differentiation because the customers from Apple are highly loyal to any product they release thus making the curve inelastic. For instance, last year Apple released the iPad. They improved a lot of aspects from the ipod touch and thus it attracted more customers into this new device.
2. Apple's economic profit in the short run could make a supernormal profit if the firm tries to advertise their product of or if more customers buy Apple products because of a change of heart. As the demand is inelastic, in the long run the firm should make a normal profit.
3. Laptop computer companies would normally differentiate their products with different applications and programs installed on the laptops. The main way would be with OS differentiation but they could also entice customers with free iWorks or free Microsoft Office.
In my case, I would not buy a MacBook Wheel because I do not share the love for Mac OS X. Besides that fact I would consider it.
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@ Behiye_Ilkay_Dasdemir
I agree with most of your points about the product differentiation of Apple but I have to disagree with you when you say that you would buy the MacBook because of its design. In my opinion, you should buy products based mostly on the performance of a machine.
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@ Ashini,
A very good explanation and i agree with all your statements including your personal view.
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In the Apple demand curve graphs found in the blog posting, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
This happens because of a successful advertising campaign. This makes people think that their laptops are useless compared to the new laptop, thus making them want to buy this new "innovative" product.
Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
Now the profits will become supernormal, because they will by able to charge a high price for this product because it has basically no competition. But there will be a time in which other companies copy/make a similar product, which will lower the demand curve.(we have seen this with the Ipad) If apple wants to keep its profits high, then it will have to make another product or try to improve its products to create a greater difference between them and the competitors.
What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
They try to differentiate their products in many ways. An example of this is the Ipad and the Kindle. Both can be used as e-readers but one is in color and more expensive and the other one is much more economic but has e ink which is easier on the eyes. NO, I will not buy a mac book wheel, it is a JOKE, made to be funny, by showing us a product that people are buying even though it is the worst product ever.
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Hello Kang San Keum.
I dont think that the answer to your last question is well thought of. How would you consider buying a computer which "only takes about 45 minutes to write an email", among many other serious flaws? Also Mac OSX is not a type of computer, it is the software that runs the computer, and most likely the mac wheel will have it.
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-In the Apple demand curve graphs found in the blog posting, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
This is because Apple produces different products than other companies. And suddenly people want to buy, as a result of this demand curve increases.
-Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
I think Apple's economic profits will fall. Because laptops will look like similar. If Apple wants to maintain its profits in the long-run they should differentiate their products, they should produce different products than the other companies.
-What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
Over the years companies develop their technologies to produce different products. Especially we can see these differences between their designs,hardwares and battery life. I would buy Macbook wheel if it was real.
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@Kang_San_Keum
I agree with your answers. Especially your opinions for the first question are really good.
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-In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
Apple makes different products and it increases their demand.Products which are different become more attractive and consumers want to buy more. Because of the increase in demand , demand is less elastic than before.When there is a decrease in elasticity it will have higher slope.
- Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
In monopolistic competition, the only way for a company to increase their profits is to produce new and attractive products.
- What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would you buys a MacBook Wheel if it were real?
(apple)Company usually makes new products by improving them the old products which are belong to the company. Companies also having a lot of advertisements.These make Apple’s products seems like they have higher value than Microsoft’s products.
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Do?an Can,
I agree with your comments and my comments are basically talks about your opinions
"Over the years companies develop their technologies to produce different products. Especially we can see these differences between their designs,hardwares and battery life. I would buy Macbook wheel if it was real."
I am with you on that and I would buy Macbook wheel if it was real.
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1. The slopes of the demand curve increase because it becomes more inelastic due to product differentiation. People like to buy the newest and the best products and don’t mind if the cost is high or low, they buy it at whatever price. This is why demand increases in the Apple industry.
2. If the market for laptop computers is monopolistically competitive then Apple’s economic profits, which were once supernormal, would become normal. So what Apple should do is to always maintain its differentiated products and care for people’s needs. They should gain loyalty from their customers, too. Apple should also make sure that they are always ahead from the rest of the laptop industries and that they have always the best, making sure that the other industries don’t have the potential or the money to do such different products.
3. Apple and its competitors differentiate their products by making new and better versions of past models. They try to get the attention of consumers through advertising and by making their products in such a way that they catch the attention of many people. I would not buy the MacBook Wheel since it seems useless.
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@ Francisco_Jose_Carillo_Fernandez
I totally agree with all your answers, especially number 1 which says that Apple catches people's attention through successful advertising.
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1)The macbook wheel is an innovation on Apple computers. Before this innovation, the Apple market was still successful and it was the price-maker on the market even though it wasn’t in monopolistic competition. The new developing technology increases the demand for the particular products. Also Apple is a very well-known brand and it has loyal consumers who can buy every newly product macbook. Moreover, the Apple advertisements and the attractiveness of the newly produced Apple products are really very effective on the consumers. Therefore it increases the demand.
2)If we assume that the laptop market competition is monopolistic, then it means that different firms should try hard to differentiate their products with the new technology and so on. In this case, Apple has a great chance to make huge profits out of their products, because they are always the first ones who create high-tech products, the mackbook wheel is just an example. Over time, apple will continue to maximize its profits, if there won’t be any innovation on the other laptop producing markets. If Apple wants to maintain its profits in the long run, then it should play the game according to the rules. Apple should continue creating new and attractive product in terms of appearance, and should definitely pay a huge amount of money on advertising.
3)For example, Apple is trying so hard to innovate its old products. It produced a macbook, I-pod touch and stuff like this. I have not seen any other company coming out of their box and saying that we have created a new product, or we have developed something, they only imitate what Apple does. If the macbook wheel were real, I don’t think that I would buy it because it would be too expensive for a person like me, and also it has some disadvantages too. For instance, it does not have a keyboard, and at first place it looks like it is an advantage and it is the main aim for that computer, but I don’t think it is easy to type in a computer like that. I heard that a person typed an e-mail at 45 minutes on macbook wheel, which is an extremely high amount of time and I don’t think that I have that much time and patience. Therefore, I believe I wouldn’t buy it because I think that it is no good for me.
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@Francisco_Jose_Carillo_Fernandez
I agree with you Francisco. It is very important to have a great sense of advertising because it is effective on consumers. But I also believe that the macbook wheel is very appealing in terms of appearance, and it can be a factor to for the demand to be raised.
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1)We know that Apple has a different style than the other computer producers have. Therefore the product of the Apple does not fit the other ones. It makes the consumers of that company buy every single product of Apple. With the developing technology, and the different style Apple is always price maker. Thus, demand for Apple always increases.
2)If we assume that the laptop market competition is monopolistic, then it means that different firms should try hard to differentiate their products with the new technology and so on. In this case, Apple is already the winner. As I said before what makes Apple successful is the unique creation of that company. If Apple wants to make profit in the long-run, it can continue to create the queerest product very fast. I believe that the consumer of the Apple will always continue to buy those products. Therefore, Apple will be successful in the long- run too.
3)As a person I would not prefer Apple. Because it is just coherent with its other product. And mackbook wheel has no keyboard so it is hard to use it. Also I believe that new innovation will be so expensive for me.
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@Daniella Majluf
I like your point and agree with you. You said people are tend to buy new products and they don't care about the price. Therefore they prefer Apple. Then you show Apple as a veblen good which is very logical.
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1. 1. In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
Apple company always present different types of product to the market and this feature makes them different than other companies. Moreover, consumers are attracted by diffirentiated products, so the slope of graph rise due to demand becoming inelastic. So, when a consumer gets an apple product apple becomes more stronger than other companies.
2. Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
In monopolistically competitive , and in the long term supernormal profit will change into normal profit. In order to maintain its profit in the long run, apple should continue to produce differentiated products to continue to make supernormal profits and to make its place stable in the market.
3. What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
Other companies have differentiated their products generally by improving the old type products. For example; new iPod models. Furthermore, in order to introduce the products many companies pay too much money for advertising like with Mac and Pc commercials.
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@ Bahar Erdogdu
I tottaly agreee with your response. "In monopolistic competition, the only way for a company to increase their profits is to produce new and attractive products." at this sentence you're totaly right. Because as we see from our da?ly l?fe, people always want to have different type products. So when new and attractive products are produced the profits that compines make will increase .
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Discussion questions:
In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
The shift to the to the right of the demand curve was a result of the introduction to the market of the new product. This change in the demand was cause by factors as advertisement, innovation and loyalty to the firm. This non-price competition factors make the demand curve of the Mac product go to the right.
Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
Assuming that the market for laptop computers is monopolistically competitive the economic profits of Apple will become normal profits because many companies will enter the market attracted by the supernormal profits. The excess of suppliers in the long run will produce the price of the product go down until the point which the profits are normal.
What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
Apple and its competitors have attempted to differentiate their products over the years by innovation and making the consumers loyal to their products. I will not buy the Macbook Wheel if it were real because the wheel will make me waste a lot of time as well the mouse.
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Hi, Ece_Erdom I agree with your first answer I think that the key of sucess of Apple is innovation because their is no other company for the moment that offer the market the amount of different innovative technological products as this firm. In your third answer you say that many companies offer the public "imitations" of the products of Apple I also agree with you but at this point loyalty a factor of non-price competition enters to the situation and in many cases if the consumer can pay for it they will prefer Apple.
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1.In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
When Apple differentiate its product, demand of it increase because people started interest with apple more so we can say that Apple was successful when they differentiate their products and produce new products. As in article mentioned; “Through differentiation, which means making its products unique and attractive to consumers, Apple attempts to increase market demand for its computers, while simultaneously making demand less elastic.” So Apple can make more profit by changing their price easier because they became more monopolistic and after the differentiation their demand curve became inelastic.
2.Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
After a time Apple started make normal profit and do not have any more supernormal profit because when other firm see how demand is inelastic and profit is much they want to also participate those markets to share profit so Apple profit will become normal profit. If Apple wishes to maintain its profits in the long-run, Apple should continue to differentiate their products.
3.What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
They are differentiating their old products buy using new technologies and their imaginary so they became more successful. Lastly, I would not buy a Macbook Wheel if it were real because I love to use keyboard.
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@Muhammet_Murat_Sekban
I agree with your comments about questions. Actually, you got the right point in second question because I think it is the best way for Apple to continue to diffentiate their products.
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1.) Demand for Apple has increased because of the reputation of Apple and as in computer, this brend has shown the quality of its products.
2.)I think in this situation, the demand for Apple is not going to stay the same. The products are going to be so similar.
3.) Honestly ? am also a fan of Apple, because ? think in this computer market, Apple is the only company that tries to invent new things and develop versions of series. Plus, Apple uses the most well qualified techniques and items when creating sth. So if it was real, ? would buy it ( but as it is going to be a very expensive product, ? would wait for prices to fall a bit, then ? would buy it
)
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In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
This happens because people want to have the newest things in the world, and want to have the best ones as well. By saying the best ones, I mean that everything that is new, is supposedly better than things already created. This means that new computers would be bought just to have the "best".
What will happen to Apples economic profits over time is that they will increase amazingly. This is because people will satrt changing to Apple and leaving other computers, just because Apple works better. What Apple must do is that they should innovate computers and products not very far from each other. This means that they should regularly innovate their models.
Some real ways companies like Apple and its competitors have attemptes to differentiate their products over the years would be new systems, and much more "space" and memory, to do a lot of nw things in the computer, attempt to be the best for what the human needs. I would buy a MacBook Wheel because it is a very good machine and with a great quality as well.
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@mboade
I agree with you when you say that the shift to the to the right of the demand curve was a result of the introduction to the market of the new product. This is because it is the reality, and it is the correct and most obvious answer.
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The apple demand curve increases because the success in the market made consumers willing to buy apple product and helped them to appeal their images to the consumers. These two factors corporate to increase demand curve.
In monopolistic competition, apple would not be able to make supernormal profit in the future, since many companies would join the laptop market. In monopolistic competition, there is no barrier to join the market, and apple’s supernormal profit would attract other companies to join, apple would make normal profit in the future. If Apple wishes to maintain its profits in the long-run, it has to develop and upgrade new products so it can prove that its products are different and superior compare to other companies’ product.
In the real ways, Apple attempts to differentiate their products by changing the design, upgrading, and advertising their product. In Japan, it is easy to see an advertisement for iPhone 5 and iPad, and big poster of the iPhone and iPad is always posted on the wall in front of ‘Softbank’ (Japanese Telecommunication Company), which grabs consumer’s attention and makes them to buy it. I don’t think I would buy MacBook Wheel because it sounds inconvenient for me. I am really bad at technology, so I even don’t like MacBook that much. But I would buy other Apple products, since I found it really convenient (iPod, iPhone, and such.)
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@Kansu Aydogan
I agree with your answer for the third question. I also think that apple is the ONLY company that actually invents new products. And the design of their products are pretty cool!!
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1. This happens because differentiation makes products unique and attractive. Also, this opens up a larger demand for apple computers. This also makes demand less elastic.
2. Eventually under monopolistic competition, Apple will lose its supernatural profits as new firms get into the business. If Apple wants to keep making supernatural profits, it must keep differentiating its products as it has been doing of late.
3. Usually, it is with different features or operating systems. Also, the display and speed of the computer and its processor come into play. I would not but a mac wheel as I type faster on a keyboard than on a trackpad unless proved otherwise.
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@ Juan_Manuel_Arguedas_Rodriguez
I agree with what you said except the fact that Apple profits will increase amazingly. A monopolistic competition market makes it VERY hard to have supernatural profits in the long run.
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The demand increases because Apple differenciated its products and more people tend to buy it. Products are designed to appeal more of the needs of people.
In monopolistic competition, the supernormal profits of Apple will attract new seller to to enter the market since there are low barriers of entry. Since markets are becoming more competitive, the demand is getting inelastic.
Apple is a leading company in specilization of products. Most probably, I would not buy Mac because I am not used to its typing system in keyboard and also I am not used to the system of Mac and I find Windows more practical.
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In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
The demand curve increases because consumers like product differentiation and are therefore willing to pay a higher price if that means diversity, rather than pay a lower price for homogenous products. Apple is successfully producing products that attract various consumers.
Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
Apple has to continue creating original and creative products i.e product differentiation, to continue making supernormal revenue. Otherwise Apple will lose their revenue to the other firms that enter the industry because they are attracted to the supernormal profits companies are making and there are no entry barriers.
What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
I would personally not buy a MacBook Wheel but it sounds like an interesting concept that could attract different consumers. Apple for example came out with the iPad which is basically a touch screen laptop. This was created a huge explosion and other companies started copying Apple, etc. These companies are constantly trying to outdue each other, and when they improve their products and release new generations they always try to expand something within the computer (hardware or memory) whilst trying to figure out a way to make the computer lighter and sleeker etc.
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1/ In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
As apple increases their brand loyalty, more people are buying apple laptops, just because they are from Apple! So therefore as they increase brand loyalty, a change in price will will not make a difference in the demand for the product, making the demand curve less elastic and increasing the slope of the demand curve.
2/ Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
Apples economic profits in the short run will continue to rise as more and more customers will be wanting to buy apple laptops, however in the long run, there profits will stop increasing and eventually come to a halt as nobody can prevent new firms entering the market. In order to maintain profits in the long run, they need to use their monopolistic powers to prevent new firms from entering to market, and drive firms out of the market, they must maintain there brand loyalty, and continue to come up with new exciting products!
What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
Firms have try to differntiate themselves from other buy creating simple and good looking products, that are easy to use. I woudl't buy a Macbook wheel straight away, I would wait until reviews have come out, and see if the general public: a laptop without a keyboard does sound kind of weird!
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For the question 1, I Believe is it because they have built brand loyalty, and therefore Apple consumers will continue to buy their products even if the prices have been raised a little. Therefore, the demand slope will become less elastic! I agree with the fact that a macbook without a keyboard sounds unusual, and it will take some convincing for me to buy it!
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In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
Brand loyalty is what Apple is aiming. The increase in demand curve because the costumers are welling to pay large amount of money for the brand name.
Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
This is caused by the temptation and royalty to the brand Apple from costumers. They want to have the *newest* product which everyone will know about. This would attract new firms to enter the market since there are little barriers of entry. As markets are more competitive, therefore the demand would be more inelastic.
What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
I personally wouldn’t buy a MacBook Wheel. Firstly, it is not as simple without the keyboard, the wheel would make typing much slower. Apple has tried to differentiate themselves from other companies to set their persona as leading technology brand therefore arose costumer’s royalty .
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for question 3, I do agree that apple's products are high quality and that it does look modern. Yet considering the practicability of this product, I would not buy this product.
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1)Apple have established themselves as a firm largely through non-price competition, namely innovation. Their new, quirky ideas appeal to consumers who know little about technology – this is enhanced by the fact that they are so user-friendly and focus heavily on the aesthetics of their products – further technological developments are also likely to draw in customers as they are often patented to Apple, meaning there are no substitutes in the market whatsoever.
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2)Based on the assumptions of monopolistic competition, Apple should face normal profits in the long run – to maintain its profits, it should strengthen its brand loyalty, so that Apple goods have more inelastic demand. If Apple wants to maintain its abnormal profits, however, it needs to continue with its innovations and product differentiation to maintain its consumers’ loyalty and widen its appeal to more consumers who will turn their loyalty to Apple, if they are successful at doing so.
3)They often innovate with different styles for the body of their products, which seem to get progressively slimmer with Apple. They also seem to differentiate based on different features, the speed and design. I would not buy a MacBook Wheel as I am not a fan of gadgets and would rather stick to what I know – my brand loyalty is to HTC and not Apple unfortunately!
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1.In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
After product differentiation, Apple is able to increase its brand loyalty and the demand becomes more price inelastic. More price inelastic means that when the price increases, the quantity will not drop as much. This is because people love innovation and do not care about the price but the “freshness” of the product. The market of Apple hence will become more innovation-driven instead of price-driven. People are loyal to Apple, and price plays less effect on demand. This is why the slopes of the demand curve increases.
2.Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
Economic profits will decrease because Apple does not have the privilege to maintain abnormal profits in a monopolistic competition. Because firms are free to enter and exit the industry. If Apple wants to maintain its profits in the long-run, it must continue with its product differentiation so no other firms can produce the same products, to maintain its abnormal profits in a long run. Also, it may want to grow bigger and develop a monopolistic power to prevent new firms from entering the industry to opt out competition. But non-price competition is the key.
3. What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
They try to innovate their products in the way that no other producers in the industry can produce the technology, and they gain a patent. I would buy, a MacBook Wheel because it differentiates myself too!
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Great idea and suggestion to Apple! I would agree that Macbook will be hotter and more enticing if free microsoft is offered. I am surprised that you would not buy a MacBook. I would certainly get one and follow the trend! I think this is how Apple makes its product enticing with technology. Product differentiation is really important for a firm to maximize its profits.
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In the Apple demand curve graphs found in the blog posting, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
Lack of competition in a market is responsible for the sloping demand curve in a monopoly. Apple’s monopoly in the technology market causes the demand to shift. They have the loyal consumer base and power to raise prices however they want, no matter the product – and it’s this loyalty to the apple brand that controls the market demand.
Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time?
In the long run, a monopolistically competitive firm makes zero economic profit. Because of brand loyalty, it can raise its prices without losing all of its customers. This means that an individual firm's demand curve is downward sloping – consumers in this instance are all about having the newest and best product, so whatever firm supplies that will be successful.
What must Apple do if it wishes to maintain its profits in the long-run?
They must continue to hole the interest of consumers, which at this point shouldn’t be too difficult because Apple is successfully edging out the competition for many areas of the technology market. The brand name is prestigious, and desirable to many consumers and it has been that way for several years.
What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years?
Constantly coming out with the newest, best, and better designs for technology has definitely given firms an edge and popularity for the past few years. One concrete example I have noticed is the color alternatives. Different versions of different gadgets, even between brands are offered in one simple factor of different colors and that is appealing to many consumers!
Would YOU buy a MacBook Wheel if it were real?
No way. I know a joke when I see one! My consumer common sense would not be outweighed by a popular trend, which hypothetically would have probably seen an endless string of complaints and poor reviews within the first week of release.
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I agree with your point about the attraction of consumers to the "newest" effect. Today's world is all about having the newest and best of everything. The video featured a consumer who was pleased with the completely unrealistic product because it added the text, "Sent from my Macbook Wheel" to the end of emails!!
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1. In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
When Apple products continue to differentiate from other options in the market, they create a unique brand scarcity. To enjoy the features they can only offer, you must pay whatever price the firm decides. Demand, driven by the idea of popularity, superiority, and brand trust increases as price becomes more inelastic.
2. Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
Apple will benefit from short term abnormal increases to profit as they are selling new, distinct products. However, in the long run I believe they will also find themselves in the decreasing profits on a whole. While I do think they will have upswings during new product launches, I do not think they will break the system which forecasts decreasing long term profits.
3. What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
I think if Apple’s wheel was as good as they said it would be, I would buy one to try it out. I own a MacBook, so I do trust in Apple’s product. I think some of the big ways companies like Apple, Google, and Microsoft have done are mobile devices, television applications, and software and hardware features that focus on a specific line of functions.
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1.In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
This happends due to the fact that after the Macbook Wheel was published, all Apple customers want this luxury and expensive product – as it is popular and everyone seems to want it. Therefore this good is an inelastic good – we can see this on the graph as the demand curve is slowly creeping steeper and steeper.
2.Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
In the short-run, Apple will make abnormal profits seeing as everyone will want their new product – However in the long-run, they will lose their profits if they do not create a newer version of the product – as it will become out dated and old. People want new products they want a good that will make them feel good about using it.
3.What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buy a MacBook Wheel if it were real?
Over the years Apple has tried to differentiate its products by making it really slim and small so that it is convenient to the consumer. However, even though this product sounds wonderful and amazing, I would not buy it simply because I am a PC man. I find laptops annoying and I rather use a mouse. However that is just myself and its really personal.
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Good post! I really agree with you. I think as long as Apple continue to produce new products with new ideas and differentiate their products they will continue to make abnormal profits as all their consumers want to be different and want to be the popular person who owns an expensive good. Apple needs to be the main competitor for it to sustain its abnormal profits.
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•In the Apple demand curve graphs found in the blog posting, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
Through product differentiation, consumers are enticed by this new, luxury product are want to purchase it, no matter what the price is because they are loyal to the brand, apple. This makes the demand for the computers inelastic and therefore increases the slope for the demand.
•Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
Where apple stands at the moment, at the short-run they will be making abnormal profit. However in the long run they will notice a decrease in profits because the product will become outdated, or something else, more innovative will take its place. They will either have to product differentiate further and come up with a new product, or upgrade the macbook wheel making it even more amazing.
•What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buy a MacBook Wheel if it were real?
Companies such as apple has focused on making slim, shiny and ecstatically pleasing products. Their computers are innovatively designed and simple to use. If the macbook wheel was real I would most likely not buy it because I prefer a keyboard, as it is much simpler to use, and also in the video they said the man took 45 minutes to write an email using the wheel, and that is not impressive to me, sounds like a lot of work
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Hey spoulos2, very good answers. I agree with all your points. I like your view on the last question. It's good that you stand your ground for being a PC man, even thought the world seems to be swirled away with apple products. I myself am a apple user, and cannot imagine going back to using a PC. But I would also not buy the macbook wheel because it just looks ridiculous and very impractical to use.
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In the Apple demand curve graphs found in the blog posting, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
The demand because more inelastic because Apple developed its product, the MacBook Wheel which lead to product differentiation. Apple had a great degree of product differentiation that there are less close substitutes available in the market, this increases their monopoly power. This also creates brand loyalty and convinces customers that the product is worth purchasing.
Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
For a period of time after the launch of this new product, meaning in the short run, Apple will earn supernormal profits, but over time, in the long run, these will turn to normal profits. This will happen because there are low barriers to entry for the market, more companies will be able to make similar or maybe even better products that the MacBook Wheel. In order to maintain its profits, Apple will need to continue innovating its products but also gain consumer loyalty by advertising and branding its products.
What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buy a MacBook Wheel if it were real?
Companies can differentiate their products through the use of physical difference, differences in quality, and maybe even in terms of service, some might offer specific services to make their products more attractive.
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Hey sjowett2! Great post, I loved all your ideas, and thought they were very well explained. Referring to your first answer, I also agree that brand loyalty plays a major role in changing the slope of the demand curve. Did you notice that the demand was becoming more inelastic, like that on of a monopoly, do you think that this would mean that through this product differentiation, the firm is actually also gaining more monopoly power?
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1.In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
The slope of the demand curve increases because the demand curve is becoming more inelastic. This results because as Apple differentiates its products, it means its products are becoming less similar to the products of other firms, which means that there are fewer substitutes for Apple’s products. When there are less substitutes for a product, the demand becomes more inelastic, which is why the slope of the demand curve is increasing.
2.Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
If Apple was in a market composed of monopolistically competitive firms, it would have normal economic profits in the long run: it would not be able to make supernormal profits. In order to maintain its profits in the long-run, Apple must continue to distinguish its products, and if it can make its products original enough, it will somewhat gain monopoly power over those products, and so it would be able to continue to earn supernormal profits.
3.What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buy a MacBook Wheel if it were real?
First of all, I would definitely not buy a MacBook Wheel if it was real, due to the fact that it seems extremely inconvenient. In order to simply type this blog comment it would probably take me over an hour, if you saw how complicated it was on the video to type a simple sentence. The idea may seem fresh and original at first, but if you are creating a new product just for the sake of creating a new product and it doesn’t actually improve any features of the old product, then it is not effective and there is no point in buying it.
Over the years, however, many companies have attempted ways to differentiate their properties. One successful example, in my opinion, is used by Dell Computers (a competitor of Apple): they allow consumers to customise their products, by adding different colours or patters to their laptops, rather than just the standard black laptop. I personally found that for the same price, I could purchase a laptop that was more personalised, with the programs and design I wanted, and so this was a successful attempt at differentiating their products from the many competitors they faced.
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Hi Tanya, I like your explanations, they are very clear. I agree with what you stated about Apple's need to continue innovating its products and gain consumer loyalty to maintain its profits. It is really important for Apple to stay on top, especially because most of its sales are the result of people purchasing due to the fact that they like the brand. Without their extreme brand loyalty, I think Apple would lose a lot of its success. Especially if it came out with a product as ridiculous as the MacBook wheel – it seems like that would be an extremely inconvenient way to type anything, and would probably frustrate many of its loyal customers!
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Hey Tanya,
I agreed with all of your answer in regards to the questions. I believe that Apple company in imperfectly competitive markets differentiate their products in order to increase their market power and their price-making power. With their newly innovation continuously almost every year helped them to be able to sell their products and make their products very stand out from other competitors. By being the brand that consumers are very well known throughout the industry put them into the top choice whenever consumer needed to purchase the product. Yet, with their new coming out with a product as the .Macbook Wheel, will have a huge affect on other competitors very well. Good job! Great Work.:)
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Hey Monique,
I enjoyed reading your response to the article. You mentioned a few interesting points in your response to the first and second questions. I also enjoyed reading your personal experience for the last question; and what you are looking for in product differentiation.
Thanks
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After Apple product differentiation through the Macbook Wheel, the slope of the demand curve increases; becoming more inelastic. This is due to the fact that through the product differentiation, the producer (Apple) may have increased their brand-loyalty among consumers; successfully providing consumers with a product that is superior to that of their competitors. This results in a situation in which consumers may continue to purchase Apple products, even at a slightly higher cost; which results in the more inelastic demand curve for the product.
Assuming that the market for laptop computers is monopolistically competitive; the fact that Apple is receiving short-run abnormal profits will draw more firms into the industry. In the long-run, this will result in normal profits for all the firms in the industry. However, Apple can continue to make abnormal profits in the long-run through constantly adding their products, changing the design, appeal, etc, in order to differentiate it from the products' of their competitors and increase the consumer loyalty for their brand.
What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
Apple has differentiated its product in numerous ways throughout the years; providing consumers with products that are 'sleeker', faster, lighter and (in general) more 'attractive' than the products of their competitors. However, other firms also differentiate their products. This is evident in HP or Dell computers; in which consumers can customize the designs of their purchases.
I wouldn't buy a Macbook Wheel if it were a real product. It is a product that seems very inefficient; and the product differentiation has gone to such an extent where it compromises the effectiveness of the product.
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1.)In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
The slope of the demand curve increases due to the fact that the demand curve is becoming more and more inelastic. This occurs due to the fact that Apple differentiates its products. Their products are becoming less and less like the products that are being manufactured by other firms. This means that there are fewer substitutes for Apple’s products. When there are no substitutes for a product, the demand inelastic. This is why the demand curve increases.
2.)Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
If the market for laptops became monopolistically competitive, Apple would develop normal economic profits in the long run. This means that the company would no longer make supernormal profits. If Apple wanted to maintain supernormal profits in the long run, it would have to continue to distinguish its products. This way there would be no substitute for Apple products and they would develop a monopoly power over other firms and it would maintain supernormal profits.
3.)What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buy a MacBook Wheel if it were real?
Many firms have used different strategies in order to differentiate their products. I think the only important strategy that needs to be employed is the fact that you need to produce something different. An ice cream shop would want to put out a new flavor that is only available at their shop. This would mean that there were no substitutions for this flavor. I would most defiantly not buy a MacBook Wheel. It seems new, innovative and creative but at the same time very inconvenient. I do not think it would be practical for everyday use. I feel like it would be very successful regardless due to the fact that Apple has such a large group of followers that support their products. They have never really failed with a single product.
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Your response was very clear and to the point. I like your answer to the last question. I never thought about the fact that firms can differentiate their products with their respective logo. I think that it is important that companies differentiate themselves in all aspects.
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In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
The slopes of the demand curves increase because Apple, by creating a revolutionary product, eliminates the presence of competition, and therefore the demand becomes more inelastic.
Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
Apples short-run supernormal profits will be normalized soon after the competitors catch up. Apple must continue to release revolutionary products so that they differentiate themselves from the competition.
What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buy a MacBook Wheel if it were real?
Apple continuously ensures that their products are more advanced than their previous lines, and also the similar products made by their competitors. This way each of their products is differentiated and receives a lot of attention in the media.
Personally I would not buy a MacBook Wheel as I prefer the convenience of a keyboard, but I can understand how others would be drawn to it.
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I agree with what you said in part 3 about the products being almost addictive. Apple does a good job making their products fashionable, which helps with their demand.
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1 It happens because of the differentiations that make the product luxurious and more unique than over brand. Also because of the brand name, people will rely more on Apple than other brand product. These facts will make the demand for Apple increase.
2. Assuming the market for laptop is monopolistic competitive, Apple will make normal profit as many companies will enter the market. In the long run the price of the product will go down until normal profit but if Apple wants to maintain its actual profit they should continue to diverse the variety of their products.
3. Apples computer does not only change their design but it also improved its software or the quality of the computer. Therefore every new version of Apple computers is a better version of the previous one. Consumers will be interesting in those new qualities. But I guess if i didn’t already have a Mac I would of bought it. However most of the people just need a simple computer and don’t need all of the software that Apple can provide. So I guess if I am happy with mine I would not buy the new version. Also some people feel like they need to have the new version or every new gadget that a Mac can provide, they are kind of addicted to the product and will buy this new version if it exist.
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In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
Since Apple differentiates its products from other products in the market, is there a smaller group of substitutes for Apple laptops. Therefore, the demand becomes more inelastic, giving the curve an increase of its slope.
Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
If the market is monopolistically competitive, this means that they will make normal economic profits. Though Apple wants to make abnormal profits, so they will have to differentiate their products from the products in the market to maintain their profits.
What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
A few days ago, I saw this laptop: http://www.engadget.com/2012/02/22/razer-blade-re…
It is so different that all the other laptops. It has a 4 inch touchpad with LCD screen, in stead of the normal mousepad. Also it has several buttons to be customized to the user's preference. So if you're a gaming person, you put your favourite 10 games in those buttons. But if you're more a websurfing person, you can put your ten favourite websites in the buttons. They manufacturers have differentiated their laptop from all the ordinary laptops.
If the MacBook Wheel were real, I would absolutely NOT buy it. The way you should type with it is the most horrible system I have ever seen. I type 120 characters per minute, with that I would type maybe 10 per minute. It slows the typing down. Also, if I would have the choice between a normal MacBook and a MacBook Wheel, I'd chose the regular one, because it has a keyboard, and thus I could work better with it.
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1. The production cost increases and therefore the price increases. There is another product that apple has to sell and therefore they will be increasing the price they are paying in order to create it.
2. Over time the economic profit will decrease; however, if they continue to produce new products, their profit will continue to be abnormal.
3. Apple has a unique, sleek and modern look to their computers. This draws the consumers in. They have many different products that cater to different needs and age groups. They also had innovative technology. They make sure all their customers are happy with the products they are buying so they don’t sell them the wrong item. This makes the customers want to come back and purchase more products.
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I agree with the fact that Apple creates new products that are ahead of other brands. For example, they created the iPad before any other brand did. We all know that the other brands simply copied them and are possible selling their versions of the Ipad for a lower price.
I am also not a fan of not having a keyboard; however, i also think others could be drawn to it. (Ironically enough i have an iphone)
Thanks!
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1.In the graphs above, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
The slopes of the demand curves increase after successful product differentiation, because the curve is becoming more inelastic. With each new product, Apple consumers become more and more loyal to Apple. As one of the consumers said in the article “I would buy almost anything created by Apple”, this just shows what an amazing reputation Apple has built up for themselves. As the demand curve becomes more inelastic, consumers will buy the products even at a very high price, the wheel’s price was over 2, 600! But consumers don’t seem to mind.
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2.Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
If Apple were in a monopolistically competitive market, Apple would not be able to make super-normal profits. Thus Apple would have to continue being innovative, and would have to further differentiate themselves from other firms in order to stay on top and to achieve the supernormal profits it strives for.
3.What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buys a MacBook Wheel if it were real?
Apple has done several things in the past to achieve differentiation. For example, they came out with the Macbook Air, the lightest and the thinnest laptop ever created. This made them standout. Apple computers are extremely resilient to viruses…a great bonus!
I would definitely NOT buy a Macbook Wheel if it existed….to me, it looks like a huge iPod….why do I need such a big wheel? Sure its innovative….but its TOO simple…and it looks very inconvenient…how long would it take me to type my assignments? Forever.
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Hey
While I agree that the Macbook wheel would be inconvienient and I would not buy it. I don't think its necesary to be against Apple products because they are Apple products. I personally have a Toshiba and I am happy with it….but if I had a need for a better laptop, I would go for Apple, because they do have good quality products….while it is important to watch out for products such as the Wheel, I still think it is important to apreciate, the good products they have come up with.
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1.In the Apple demand curve graphs found in the blog posting, the slopes of the demand curve increases after successful product differentiation by Apple. Why does this happen?
This happens because knowing that Apple’s new laptop- the MacBook Wheel differentiates from other laptops, consumers will buy thinking it is worth their money. Also, as the product itself is not compared to be a substitute for other laptops, it becomes a monopoly market. The MacBook Wheel itself will become inelastic and therefore the slope of the demand curve graphs will increase like the second graph above.
2.Assuming the market for laptop computers is monopolistically competitive, what will likely happen to Apples economic profits over time? What must Apple do if it wishes to maintain its profits in the long-run?
Assuming the market for laptop computers is monopolistically competitive, most of the product that each firm produce will be similar to one another; in other words, very elastic and easily to substituted. So to maintain its profits in the long run, Apple should continue what they are best at: to create products that differentiates from other firms. Apple should maintain their supernormal profits by creating new desirable products- such as the iPhone and the iPads, so that the consumers will continue buying since their brand loyalty was already built in.
3.What are some real ways companies like Apple and its competitors have attempted to differentiate their products over the years? Would YOU buy a MacBook Wheel if it were real?
Personally, I am an Apple fan. I liked the idea of touch screen/ big screen and many other shiny products that Apple created over the years. However, I was not in favour of the idea of not being able to type. Therefore, I would not want to purchase this MacBook Wheel. Moreover, just like the news reporter said in the news, that it took the man 45 minutes to type an email to his friend using the MacBook Wheel which proves that it is unpractical. Even though this product is innovative and meant to be simple, I still think it is too simple.
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Hello,
I totally agree with your perspective on that "people love innovation and do not care about the price but the “freshness” of the product," which I forgot to mention in my post. It is very true that most of the time people do not care about the price of the product when it comes to electrical appliances. Therefore people buy it due to not only that but also brand loyalty. In the end the firm gains and develops into a monopolistic power over the market.
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1) In the demand curves of Apple which we saw in the above post, there is a clearly indicated increase of the demand curve's slope due to a clear product differentiation which was initiated by apple's developers. This is a likely thing to occur because apple has a very loyal customer base who always wants a different product than the mainstream. These customers will pay for the differentiation which actually also is due to a higher quality. With a higher quality approach customers are happy to pay more because they think it is worth the extra money spent. This actually brings a big advantage since apply products therefore have no direct competitors causing no substitutes to being offered on the market. Therefore the apple electronic product market becomes monopolistic causing the products to become inelastic. This effect is shown in the sec on demand curve where the slope of the curve will increase.
2) In my opinion the profits will decrease since other laptop makers will catch up quickly so that apple has to create new advantages with their products in order to maintain the monopolistic market.
3) Companies which always tried to be different mostly made a start with high quality materials and components which are more expensive to use and sell in the first place but since customers are happy to pay the increase of quality and uniqueness it pays out at the end causing long-run profits to be maintained.
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Hi Simon,
Your answers are good responses. In question 3 you mentioned in my opinion how Apple runs. However, in other computer companies with profit margins that aren’t as high, they might go for lower quality materials. This is why they aren’t up to Apple’s standard, don’t you think so?
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