While there are many different methods by which an individual may develop, understand, and apply the concepts of economics, perhaps one of the best ways by which an individual is able to demonstrate their understanding of such concepts is through the application of those concepts to items in the world around them. In working to demonstrate an appropriate understanding of the concepts of supply and demand and equilibrium price, an article has been selected for review in order to better display an application of that understanding. “Is the Apple Watch a game changer?” by Doug Gross (2014), discusses the details of the new Apple product and will serve to allow for a clear demonstration of those concepts.
Supply and Demand
The concepts of supply and demand are ones that that are instilled in individuals at an early age. The price of a given good is determined by the amount of goods that are present and the demand for those goods by consumers (Supply and Demand, 2010). The greater the supply of a particular good, the less of a demand for that good, and the lower the price that will be paid for that good; on the other hand, the greater the demand for a good, and the less of a supply of that particular good, the greater the price that will be paid for that item (Supply and Demand, 2010).
Equilibrium Price
Equilibrium pricing is the point at which a certain pricing is attained and maintained; at this point, the price being paid for the item is considered to be reasonable based on the supply and demand for the product, and the supply and demand for the product are equal (Funderburk, n.d.). It is the point at which the supply and demand curves intersect in Figure 1. If the supply and the demand for a particular product are in equilibrium, the manufacturer of the good will have no reason to change the price, unless influenced by outside factors, and thus the pricing may be said to be in equilibrium (Funderburk, n.d.).
The Apple Watch
Wearable technology, or wearable tech, is growing in popularity, and as such the market is seeing a host of new products being introduced or announced in order to keep public momentum going strong. Wearable tech consists of any piece of technology that may be worn on the person as opposed to treated as a separate physical device, one that cannot connect to the individual or the individual’s clothing. The Apple Watch is one of the latest pieces of wearable tech to be announced. Set to be available for purchase in 2015, this smart watch will be available in three different styles and two different sizes with a host of different color options (Gross, 2014).
The watch is reminiscent of items seen on Star Trek in the 1970s, and can perform many of the features of the technology seen on the show. The smart watch must be attached to an iPhone, but in so doing, it will have a tap touch interface, silent pulse notifications, scroll and zoom features, the ability to pay through the watch for items at participating stores, health monitoring, the ability to play music through the watch, the ability to carry on a conversation through the watch, walkie talkie functionality, a personal assistant (Siri), and yes, even the ability to be used as a watch and allow the wearer to tell time (Wakabayashi, Bensinger, & Barr, 2014; Gross, 2014; della Cava, 2014).
Economics and the Apple Watch
While there are economists who are concerned with the potential demand for the Apple Watch, Apple executives are optimistic about its success; though many other smart watches have failed to have an impact on the market, Apple’s CEO Tim Cook states that as there is a market for fitness bands, he feels as though the Apple Watch will be a success given the fact that it has a similar price tag to some of those items on the market and offers those features and more, making it a better deal for many (Gross, 2014). Market researchers are skeptical, stating that while they believe the Apple Watch will do better than other smart watches have in the past, they feel as though the device is not yet a necessary one, something that will still be perceived as a luxury item as opposed to a must have device (Gross, 2014). It is clear that an equilibrium price is not likely to be reached for many years in the future, as while there are current smart watches available, Apple products are targeted toward a certain audience and serve to consistently drive up prices on the products they offer. Supply will most likely be limited in the first year, based on past efforts by Apple to drive up demand for their items, and demand is likely to be high for the product as a result of the Apple enthusiast market and as a result of the tie-ins and comparisons that have been made to Star Trek devices, due to the increasing popularity of Abraham’s reboot of the series.
Conclusion
Though it may be said that a newly announced product may not be the best item to use in the explanation of supply, demand, and equilibrium pricing, the fact of the matter is that it is an ideal product to use for this purpose, as speculation may run rampant regarding the potentiality of the device and the type of demand and supply that may be present for the device. While Apple has consistently proven that it does know what it is doing in terms of the products it releases, this is their first foray into certain offerings made by this product (such as the payment options), lending even greater speculation (Gross, 2014). The demand being drummed up for the product is high; now only time will tell what type of supply will be offered and when the market will reach equilibrium.
- della Cava, M. (2014). Apple Watch features you maybe didn’t know about. Usatoday.com. Retrieved 11 September 2014, from http://www.usatoday.com/story/tech/2014/09/10/apple-watch-iphone6-communication/15397059/
- Doug Gross, C. (2014). Is the Apple Watch a game changer?. CNN. Retrieved 11 September 2014, from http://www.cnn.com/2014/09/10/tech/mobile/apple-watch-game-changer/index.html?hpt=te_t1
- Funderburk, D. Equilibrium Price. Faculty.tamuc.edu. Retrieved 11 September 2014, from http://faculty.tamuc.edu/dfunderburk/231/notes/EquilibriumPrice.htm
- Netmba.com. (2010). Supply and Demand. Retrieved 11 September 2014, from http://www.netmba.com/econ/micro/supply-demand/
- NetMBA.com. (2010). Supply and Demand. Retrieved from http://www.netmba.com/images/econ/micro/supply-demand/supplydemand.gif
- Wakabayashi, D., Bensinger, G., & Barr, A. (2014). Apple’s Tim Cook Makes Boldest Bets Yet With New iPhone, Apple Watch. WSJ. Retrieved 11 September 2014, from http://online.wsj.com/articles/apple-boss-makes-his-boldest-bets-yet-1410306290
