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Apple Computer, Inc.                    Economics 101-01                             Group IVMark Bender, Mike Rush, Alici...
Topics for DiscussionZack Klingensmith           Alicia Sutton• History/Background        • Monopoly• Advertising         ...
History•Founded in 1976 by                           Current Apple ProductsSteve Jobs, Steve                           •Pe...
History of Macs
The “Look” of Apple• Apple targets a younger  audience by appearing  as a much more casual  company• We decided to dress a...
Consumer Choice• Scarcity is the reason the study of  economics exists.• If everyone had unlimited time and money,  everyo...
“I’m a Mac” vs. “I’m a PC”•Apples newest adcampaign•Boring vs. Hip•Set to make Macs seemlike the “cool” thing to do•Long s...
the pc•   drab•   boring•   plain•   all work•   no multimedia•   virus-prone
Wage DiscriminationQ: Who is this?  – Born to Unmarried Syrian Father and    American Mother  – Put up for Adoption  – Dro...
Wage Discrimination•   Steve Job’s Salary…•   $1/year•   Sweatshop Worker’s Salary•   $50/month ($600/year)•   Steve Job’s...
Topics for DiscussionZack Klingensmith           Alicia Sutton• History/Background        • Monopoly• Advertising         ...
The Three Basic Economic QuestionsWhat to produce?• Computers• MP3 Players• Software
The Three Basic Economic QuestionsHow to produce?• Assembly Lines• Robots• Sweatshops
The Three Basic Economic QuestionsFor whom to produce?• Small Businesses• Big Businesses• Individuals
The Three Basic Economic Questions          The Basic Rule:        If you can afford it,APPLE WILL SELL IT!
The Ceteris Paribus Factors of               Demand• INCOME- Economy is doing well and as a result  buyers are having more...
The Ceteris Paribus Factors of                Demand• PRICES OF RELATED GOODS- There are many  substitutes in both the com...
The Ceteris Paribus Factors of                Supply• INPUT PRICES- The prices to make Apple’s products  have been becomin...
The Ceteris Paribus Factors of                  Supply• EXPECTATIONS OF SELLERS- Apple is always  updating its equipment a...
Topics for DiscussionZack Klingensmith           Alicia Sutton• History/Background        • Monopoly• Advertising         ...
Substitutes• A good that can be        • Apple has a large  used in place of            selection in their iPod  another g...
Apple’s iPod’s and Substitutes• If the price of metal used in the  construction of the iPod goes  up in price, then Apple ...
Complements      • Complements are        opposites of        substitutes.      • They are products        that are usuall...
Apple iPod’s and Complements    If the price of Apple’s iPods went down,    then the demand for the complements    would i...
Elasticity• Elasticity is the  degree to which  consumers respond  to price changes• A measure of  sensitivity of one  var...
Elasticity• A value greater than 1 is an elastic good• A value less than 1 is an inelastic good• Factors that affect elast...
Apple’s iTune’s and Elasticity• Substitute for price elasticity of iTunes is to go  out and buy the CD• Average price of a...
Apple’s iTune’s and Elasticity• Steve Jobs, Apple’s CEO  said he’s still pursuing  iTunes because it helps  sell the iPod•...
Topics for DiscussionZack Klingensmith           Alicia Sutton• History/Background        • Monopoly• Advertising         ...
Apple’s Monopoly on the MP3 Market•Competitors can’t touch iPod•Ease of use and ‘cool’ factor•iPod turning many customers ...
Transition From Monopoly• The music industry is very profitable• This means that MP3 players are also a  hot commodity as ...
Oligopoly on the Horizon?                                                  • Stealing market share and                    ...
Topics for DiscussionZack Klingensmith           Alicia Sutton• History/Background        • Monopoly• Advertising         ...
Apple and Government Intervention• Government intervention in music downloading  industry created a demand for Apple’s iTu...
Apple and the Financial Market             Past           Present            Future
Apple and the Financial Market             - Past -• 1976 – Steve Jobs and Stephen Wozniak found  Apple. Third co-founder,...
Apple and the Financial Market             - Present -• Apple Computer Inc. (AAPL)’s stock quotes
Apple and the Financial Market             - Future -• Fundamental analysis – a method of  predicting a stock’s price base...
Apple and the Financial Market           - Future -– Low-priced iPods and Mac computers using  Intel chips are expected to...
SummaryZack Klingensmith           Alicia Sutton• History/Background        • Monopoly• Advertising               • Oligop...
Questions and Answers…Do you have any questions…?
Thank You For Your     Support!     ECN 101-01      Group IV      Fall 2006
Apple computer l
Apple computer l
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  1. 1. Apple Computer, Inc. Economics 101-01 Group IVMark Bender, Mike Rush, Alicia Sutton, Angelo Granata, Zack Klingensmith
  2. 2. Topics for DiscussionZack Klingensmith Alicia Sutton• History/Background • Monopoly• Advertising • Transition• Wage Discrimination • OligopolyMike Rush Mark Bender• Economic Questions • Government Intervention• Ceterus Paribus • The Stock Market • SummaryAngelo Granata• Substitutes/Complements Questions and Answers• Elasticity
  3. 3. History•Founded in 1976 by Current Apple ProductsSteve Jobs, Steve •Personal ComputersWozniak, and Ronald •Laptops/NotebooksWayne. •iTunes/Music Downloads•Company started by •Serversselling handmade •Much More…computers that weremanufactured ina garage.•Has since expanded itsmarket into a wide rangeof computer associatedmaterials.
  4. 4. History of Macs
  5. 5. The “Look” of Apple• Apple targets a younger audience by appearing as a much more casual company• We decided to dress as we did to represent Apple as well as we could• Notice Steve Jobs at the shareholders meeting:
  6. 6. Consumer Choice• Scarcity is the reason the study of economics exists.• If everyone had unlimited time and money, everyone would own the best computer possible.• Apple must try to convince consumers that they should spend money on their product and not on Dells or Compaqs or Sonys…• The most popular way…
  7. 7. “I’m a Mac” vs. “I’m a PC”•Apples newest adcampaign•Boring vs. Hip•Set to make Macs seemlike the “cool” thing to do•Long series of commercials•If you were in the market…
  8. 8. the pc• drab• boring• plain• all work• no multimedia• virus-prone
  9. 9. Wage DiscriminationQ: Who is this? – Born to Unmarried Syrian Father and American Mother – Put up for Adoption – Dropped out of College – Now makes $1/year salaryA: Steve Jobs
  10. 10. Wage Discrimination• Steve Job’s Salary…• $1/year• Sweatshop Worker’s Salary• $50/month ($600/year)• Steve Job’s Stock Option• $381,000,000.00• Sweatshop Worker’s Stock Option• Non-existent
  11. 11. Topics for DiscussionZack Klingensmith Alicia Sutton• History/Background • Monopoly• Advertising • Transition• Wage Discrimination • OligopolyMike Rush Mark Bender• Economic Questions • Government Intervention• Ceterus Paribus • The Stock Market • SummaryAngelo Granata• Substitutes/Complements Questions and Answers• Elasticity
  12. 12. The Three Basic Economic QuestionsWhat to produce?• Computers• MP3 Players• Software
  13. 13. The Three Basic Economic QuestionsHow to produce?• Assembly Lines• Robots• Sweatshops
  14. 14. The Three Basic Economic QuestionsFor whom to produce?• Small Businesses• Big Businesses• Individuals
  15. 15. The Three Basic Economic Questions The Basic Rule: If you can afford it,APPLE WILL SELL IT!
  16. 16. The Ceteris Paribus Factors of Demand• INCOME- Economy is doing well and as a result buyers are having more money to spend• NUMBER OF CONSUMERS- More and more people are now becoming interested in Apple computers, iPod and software• EXPECTATIONS OF BUYERS- Buyers of Apple’s products hope and expect that the iPod and other products will become more inexpensive as more are bought and produced. Additionally, consumers also expect Apple to be able to produce to their demand.
  17. 17. The Ceteris Paribus Factors of Demand• PRICES OF RELATED GOODS- There are many substitutes in both the computer and MP3 player industries. The substitutes in the computer industry are very comparable, but the substitutes in the MP3 are not at all close to the iPod, which was the pioneer in the field.• TASTES- Apple has been able to figure out its customers tastes and adapt its products to fit those tastes.
  18. 18. The Ceteris Paribus Factors of Supply• INPUT PRICES- The prices to make Apple’s products have been becoming less and less due to foreign countries and foreign companies making the products at much less of a cost.• NUMBERS OF SELLERS- In the computer field there are many other sellers; however, in the field of MP3 players, Apple is the pioneer and holds the majority of the market share in that industry.
  19. 19. The Ceteris Paribus Factors of Supply• EXPECTATIONS OF SELLERS- Apple is always updating its equipment and software. As a result, it is also finding ways to become more efficient and thus lowering the price of its goods.• PRICES OF ALTERNATIVE GOODS- Apple computers are slightly more expensive than its competitors. Its MP3 player, the iPod, can also be slightly more expensive; however, it is also more technologically advanced than its rival players.• TECHNOLOGY- Because Apple is involved in the technology industry, it must be constantly updating itself if it wants to compete with its adversaries
  20. 20. Topics for DiscussionZack Klingensmith Alicia Sutton• History/Background • Monopoly• Advertising • Transition• Wage Discrimination • OligopolyMike Rush Mark Bender• Economic Questions • Government Intervention• Ceterus Paribus • The Stock Market • SummaryAngelo Granata• Substitutes/Complements Questions and Answers• Elasticity
  21. 21. Substitutes• A good that can be • Apple has a large used in place of selection in their iPod another good that is line covering the used for the same ranges of gigabyte purpose. sizes, operating• They are related such functions and price. that an increase in the • There are many other price of one will cause media players on the an increase in the market that could be demand for the other. substitutes to the iPod.
  22. 22. Apple’s iPod’s and Substitutes• If the price of metal used in the construction of the iPod goes up in price, then Apple could switch to a substitute• A substitute would be a less expensive material such as a plastic polymer that Apple uses in the construction of their notebooks.• Results in an increase demand for the plastic polymer because of the increase in price for the metal casing.
  23. 23. Complements • Complements are opposites of substitutes. • They are products that are usually consumed together. • They are related such that a decrease in the price of one will cause an increase in demand for the other.
  24. 24. Apple iPod’s and Complements If the price of Apple’s iPods went down, then the demand for the complements would increase. Some examples would be• Car application• iTunes Song Downloads• iPod Docking Stations• Protective Sleeves• Radio Transmitters
  25. 25. Elasticity• Elasticity is the degree to which consumers respond to price changes• A measure of sensitivity of one variable to another• Formula: absolute value of percent change in quantity demanded divided by the percent change in price
  26. 26. Elasticity• A value greater than 1 is an elastic good• A value less than 1 is an inelastic good• Factors that affect elasticity are the availability of substitutes, consumer’s budget and time restraint
  27. 27. Apple’s iTune’s and Elasticity• Substitute for price elasticity of iTunes is to go out and buy the CD• Average price of an online album is $9.99• Research firm Ipsos-Insight conducted a survey: $7.99 was the best price for digital-music albums• Consumers are still willing to pay between $10 and $12 for an actual CD• Labels, artists and music publishers will make more money with lower prices—finding the right price elasticity
  28. 28. Apple’s iTune’s and Elasticity• Steve Jobs, Apple’s CEO said he’s still pursuing iTunes because it helps sell the iPod• Apple knows there is interest in the iTunes store, but substitutes such as illegal downloading and the purchasing of CD’s are alternatives highly taken• Price needs to come down if consumers are to start buying in large numbers
  29. 29. Topics for DiscussionZack Klingensmith Alicia Sutton• History/Background • Monopoly• Advertising • Transition• Wage Discrimination • OligopolyMike Rush Mark Bender• Economic Questions • Government Intervention• Ceterus Paribus • The Stock Market • SummaryAngelo Granata• Substitutes/Complements Questions and Answers• Elasticity
  30. 30. Apple’s Monopoly on the MP3 Market•Competitors can’t touch iPod•Ease of use and ‘cool’ factor•iPod turning many customers ontothe Apple brand•Economies of scale achieved byApple•Apple’s pole position•The iPod has boosted AppleComputer’s Mac sales and mayultimately help the company getinto phones.•The ultimate question is whetherApple could survive in the phonebusiness
  31. 31. Transition From Monopoly• The music industry is very profitable• This means that MP3 players are also a hot commodity as more and more music is made available through pay-sites• Other companies want to cash in on this gold rush
  32. 32. Oligopoly on the Horizon? • Stealing market share and prices • Apple’s biggest competitor • Microsoft Corp.’s Zune player slowly catching up to AppleZune and iPod may become the equivalent of • Government InterventionCoke and Pepsi in the MP3 world. Numbers atthis Apple News Site indicate Zune has leaped (Talked about later)ahead of Creative, Sandisk, and other devices • Creative-iPod battle heatsto grab the #2 spot in sales dollars. They alsoindicate this is surprising because very few uppeople even know what a Zune is yet,including the sales people at retailers.
  33. 33. Topics for DiscussionZack Klingensmith Alicia Sutton• History/Background • Monopoly• Advertising • Transition• Wage Discrimination • OligopolyMike Rush Mark Bender• Economic Questions • Government Intervention• Ceterus Paribus • The Stock Market • SummaryAngelo Granata• Substitutes/Complements Questions and Answers• Elasticity
  34. 34. Apple and Government Intervention• Government intervention in music downloading industry created a demand for Apple’s iTunes – Most successful pay music download application (70% of market)• US and French government legislation that makes music downloads universal – iPod’s and iTunes’ .DRV format will become released to all downloading companies – .AAC to .WMA files (Apple would have to switch) – Could loosen Apple’s control of the music download market allowing other competitors to sell music for the iPod
  35. 35. Apple and the Financial Market Past Present Future
  36. 36. Apple and the Financial Market - Past -• 1976 – Steve Jobs and Stephen Wozniak found Apple. Third co-founder, Ronald Wayne drops out 2 weeks later.• 1980 – Apple goes public in the largest IPO since Ford went public in 1956. – The valuation is over $1.8 billion – Over 40 of the 1,000 employees become millionaires
  37. 37. Apple and the Financial Market - Present -• Apple Computer Inc. (AAPL)’s stock quotes
  38. 38. Apple and the Financial Market - Future -• Fundamental analysis – a method of predicting a stock’s price based on the fundamental forces driving the firm’s future earnings.
  39. 39. Apple and the Financial Market - Future -– Low-priced iPods and Mac computers using Intel chips are expected to boost Apple sales over the holiday– The Microsoft Zune is expected to steal some of the market-share away from Apple.– Next year, Apple’s stock is expected to rise with the release of iTV and an iPod cell-phone– 2006 leaves Apple with share-gain potential. Estimates for share are expected to rise in 2007 and again in 2008 due to a projected increase in revenue (forbes.com).
  40. 40. SummaryZack Klingensmith Alicia Sutton• History/Background • Monopoly• Advertising • Oligopoly• Wage Discrimination Mark BenderMike Rush • Government Intervention• Economic Questions • The Stock Market• Ceterus ParibusAngelo Granata• Substitutes/Complements• Elasticity
  41. 41. Questions and Answers…Do you have any questions…?
  42. 42. Thank You For Your Support! ECN 101-01 Group IV Fall 2006
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