Top Banner
© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e. Fernando & Yvonn Quijano Prepared by: Chapter 3 Where Prices Come From: The Interaction of Demand and Supply
42

Apple and the Demand for iPods

Jan 12, 2016

Download

Documents

morela

Apple and the Demand for iPods. Learning Objectives. - PowerPoint PPT Presentation
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Page 1: Apple and the Demand for iPods

© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Fernando & Yvonn Quijano

Prepared by:

Chapter

3

Where Prices Come From: The Interaction of Demand and Supply

Page 2: Apple and the Demand for iPods

2 of 29© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Apple and the Demand for iPods

3.1 Discuss the variables that influence demand.

3.2 Discuss the variables that influence supply.

3.3 Use a graph to illustrate market equilibrium.

3.4 Use demand and supply graphs to predict changes in prices and quantities.

By early 2007, over 100 million iPods had been sold and more than two billion songs had been downloaded from iTunes. Clearly the strategy of selling an expensive digital music player and selling the music cheaply has been very successful for Apple. But how long will the iPod’s dominance last?

Learning Objectives

Page 3: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

3 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Perfectly competitive market A market in which there are many buyers and sellers, all the products are identical, and there are no barriers to new sellers entering the market.

Where Prices Come From: The Interaction of Demand and Supply

Page 4: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

4 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Demand schedule A table showing the relationship between the price of a product and the quantity of the product demanded.

Quantity demanded The amount of a good or service that a consumer is willing and able to purchase at a given price.

Demand curve A curve that shows the relationship between the price of a product and the quantity of the product demanded.

Market demand The demand by all the consumers of a given good or service.

The Demand Side of the Market

Demand Schedules and Demand Curves

Learning Objective 3.1

Page 5: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

5 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Demand Side of the Market

Learning Objective 3.1

FIGURE 3-1

A Demand Schedule and Demand Curve

Demand Schedules and Demand Curves

Page 6: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

6 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Demand Side of the Market

Law of demand The rule that, holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease.

Learning Objective 3.1

The Law of Demand

Page 7: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

7 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Demand Side of the Market

Substitution effect The change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes.

Income effect The change in the quantity demanded of a good that results from the effect of a change in the good’s price on consumers’ purchasing power.

Learning Objective 3.1

What Explains the Law of Demand?

Page 8: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

8 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Demand Side of the Market

Ceteris paribus (“all else equal”) The requirement that when analyzing the relationship between two variables—such as price and quantity demanded—other variables must be held constant.

A shift of a demand curve is an increase or decrease in demand. A movement along a demand curve is an increase or decrease in the quantity demanded.

Learning Objective 3.1

Holding Everything Else Constant:The Ceteris Paribus Condition

Page 9: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

9 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Demand Side of the Market

Learning Objective 3.1

FIGURE 3-2

Shifting the Demand Curve

Holding Everything Else Constant:The Ceteris Paribus Condition

Page 10: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

10 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Demand Side of the Market

Learning Objective 3.1

Normal good A good for which the demand increases as income rises and decreases as income falls.

Inferior good A good for which the demand increases as income falls and decreases as income rises.

Variables That Shift Market Demand

• Income

Many variables other than price can influence market demand.

Page 11: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

11 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Demand Side of the Market

Learning Objective 3.1

Substitutes Goods and services that can be used for the same purpose.

Complements Goods and services that are used together.

Variables That Shift Market Demand

• Price of related goods

Consumers can be influenced by an advertising campaign for a product.

• Tastes

Page 12: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

12 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Demand Side of the Market

Learning Objective 3.1

Demographics The characteristics of a population with respect to age, race, and gender.

• Population and demographics

• Expected Future Prices

Consumers choose not only which products to buy but also when to buy them.

Variables That Shift Market Demand

Page 13: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

13 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Demand Side of the Market

Learning Objective 3.1

Variables That Shift Market Demand

TABLE 3-1

Variables That Shift Market Demand Curves

Page 14: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

14 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Demand Side of the Market

Learning Objective 3.1

Variables That Shift Market Demand

TABLE 3-1

Variables That Shift Market Demand Curves (continued)

Page 15: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

15 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Why Supermarkets Need to Understand Substitutes and Complements

Makingthe

Connection

Learning Objective 3.1

COFFEE

FROZENPIZZA

HOTDOGS

ICECREAM

POTATOCHIPS

REGULARCEREAL

SPAGHETTISAUCE YOGURT

Varieties in FiveChicago Supermarkets 391 337 128 421 285 242 194 288

Varieties Introducedin a 2-Year Period 113 109 47 129 93 114 70 107

Varieties Removedin a 2-Year Period 135 86 32 118 77 75 36 51

Page 16: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

16 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Companies Respond to a Growing Hispanic Population

You can download Spanish music from iTunes. Apple is one of many companies responding to a growing Hispanic population.

Makingthe

Connection

Learning Objective 3.1

As the demand for goods purchased by Hispanic households increases, more can be sold at every price. Not surprisingly, companies have responded by devoting more resources to serving this demographic group.

Page 17: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

17 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Demand Side of the Market

Learning Objective 3.1

FIGURE 3-3

A Change in Demand versus a Change in the Quantity Demanded

A Change in Demand versus a Change in Quantity Demanded

Page 18: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

18 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Apple Forecasts the Demand for iPhones and other Consumer Electronics

Will Apple’s iPhone match the success of its iPod?

Makingthe

Connection

Learning Objective 3.1

To decide which products to develop, firms need to forecast the demand for those products.

Time will tell whether Apple’s forecast of a large demand for the iPhone will turn out to be correct.

Page 19: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

19 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Supply schedule A table that shows the relationship between the price of a product and the quantity of the product supplied.

Supply curve A curve that shows the relationship between the price of a product and the quantity of the product supplied.

The Supply Side of the Market

Learning Objective 3.2

Supply Schedules and Supply Curves

Quantity supplied The amount of a good or service that a firm is willing and able to supply at a given price.

Page 20: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

20 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Supply Side of the Market

Learning Objective 3.2

Supply Schedules and Supply Curves

FIGURE 3-4

Supply Schedule and Supply Curve

Page 21: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

21 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Supply Side of the Market

Law of supply The rule that, holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied.

Learning Objective 3.2

The Law of Supply

Page 22: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

22 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Supply Side of the Market

Learning Objective 3.2

FIGURE 3-5

Shifting the Supply Curve

The Law of Supply

Page 23: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

23 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Supply Side of the Market

Learning Objective 3.2

Variables That Shift Supply

• Prices of substitutes in production• Number of firms in the market• Expected future prices

Technological change A positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs.

The following are the most important variables that shift supply:

• Prices of inputs

• Technological change

Page 24: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

24 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Supply Side of the Market

Learning Objective 3.2

Variables That Shift Supply

TABLE 3-2

Variables That Shift Market Supply Curves

Page 25: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

25 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Supply Side of the Market

Learning Objective 3.2

TABLE 3-2

Variables That Shift Market Supply Curves (continued)

Variables That Shift Supply

Page 26: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

26 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Supply Side of the Market

Learning Objective 3.2

FIGURE 3-6

A Change in Supply versus a Change in the Quantity Supplied

A Change in Supply versus a Change in Quantity Supplied

Page 27: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

27 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Market Equilibrium: Putting Demand and Supply Together

FIGURE 3-7

Market Equilibrium

Learning Objective 3.3

Page 28: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

28 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Market equilibrium A situation in which quantity demanded equals quantity supplied.

Competitive market equilibrium A market equilibrium with many buyers and many sellers.

Learning Objective 3.3

Market Equilibrium: Putting Demand and Supply Together

Page 29: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

29 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Market Equilibrium: Putting Demand and Supply Together

Learning Objective 3.3

Surplus A situation in which the quantity supplied is greater than the quantity demanded.

Shortage A situation in which the quantity demanded is greater than the quantity supplied.

How Markets Eliminate Surpluses and Shortages

Page 30: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

30 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Market Equilibrium: Putting Demand and Supply Together

Learning Objective 3.3

FIGURE 3-8

The Effect of Surpluses and Shortages on the Market Price

How Markets Eliminate Surpluses and Shortages

Page 31: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

31 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Market Equilibrium: Putting Demand and Supply Together

Learning Objective 3.3

Demand and Supply Both Count

Always keep in mind that it is the interaction of demand and supply that determines the equilibrium price.

Neither consumers nor firms can dictate what the equilibrium price will be.

No firm can sell anything at any price unless it can find a willing buyer, and no consumer can buy anything at any price without finding a willing seller.

Page 32: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

32 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Solved Problem 3-3Demand and Supply Both Count: A Tale of Two Letters

Learning Objective 3.3

Page 33: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

33 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Effect of Demand and Supply Shifts on Equilibrium

FIGURE 3-9

The Effect of an Increase in Supply on Equilibrium

The Effect of Shifts in Supply on Equilibrium

Learning Objective 3.4

Page 34: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

34 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Falling Price of LCD TelevisionsMaking

the

Connection

Learning Objective 3.4

Page 35: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

35 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Effect of Demand and Supply Shifts on Equilibrium

FIGURE 3-10

The Effect of an Increase in Demand on Equilibrium

The Effect of Shifts in Demand on Equilibrium

Learning Objective 3.4

Page 36: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

36 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Effect of Demand and Supply Shifts on Equilibrium

FIGURE 3-11

Shifts in Demand and Supply over Time

The Effect of Shifts in Demand and Supply over Time

Learning Objective 3.4

Page 37: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

37 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Effect of Demand and Supply Shifts on Equilibrium

TABLE 3-3

How Shifts in Demand and Supply Affect Equilibrium Price (P) and Quantity (Q)

The Effect of Shifts in Demand and Supply over Time

Learning Objective 3.4

SUPPLY CURVE UNCHANGED

SUPPLY CURVESHIFTS TO THE RIGHT

SUPPLY CURVE SHIFTS TO THE LEFT

DEMAND CURVE UNCHANGED

Q unchangedP unchanged

Q increasesP decreases

Q decreasesP increases

DEMAND CURVESHIFTS TO THE RIGHT Q increases

P increases

Q increasesP increases ordecreases

Q increases or decreases P increases

DEMAND CURVESHIFTS TO THE LEFT

Q decreasesP decreases

Q increases or decreasesP decreases

Q decreasesP decreases orincreases

Page 38: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

38 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Solved Problem 3-4High Demand and Low Prices in the Lobster Market?

Learning Objective 3.4

Supply and demand for lobster both increase during the summer, but the increase in supply is greater than the increase in demand, therefore, equilibrium price falls.

Page 39: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

39 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Effect of Demand and Supply Shifts on Equilibrium

Shifts in a Curve versus Movements along a Curve

Learning Objective 3.4

When analyzing markets using demand and supply curves, it is important to remember that when a shift in a demand or supply curve causes a change in equilibrium price, the change in price does not cause a further shift in demand or supply.

Page 40: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

40 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

The Effect of Demand and Supply Shifts on Equilibrium

Shifts in a Curve versus Movements along a Curve

Learning Objective 3.4

Don’t Let This Happen to YOU!Remember: A Change in a Good’s Price Does NotCause the Demand or Supply Curve to Shift

Page 41: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

41 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

An Inside LOOK How Does the iPhone Help Apple and AT&T?

Apple Coup: How Steve Jobs Played Hardball in iPhone Birth

Page 42: Apple and the Demand for iPods

Ch

apte

r 3:

Wh

ere

Pri

ces

Co

me

Fro

m:

Th

e In

tera

ctio

n o

f D

eman

d a

nd

Su

pp

ly

42 of 42© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e.

Ceteris paribus (“all else equal”)

Competitive market equilibrium

Complements

Demand curve

Demand schedule

Demographics

Income effect

Inferior good

Law of demand

Law of supply

Market demand

Market equilibrium

Normal good

Perfectly competitive market

Quantity demanded

Quantity supplied

Shortage

Substitutes

Substitution effect

Supply curve

Supply schedule

Surplus

Technological change

K e y T e r m s