Apple Computers, Inc.

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Apple Computers, Inc.

• Anthony Rizzo
• Toni Simonini
• Sandy Simoneaux

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Table Of Contents

• History Sandy Simoneaux
• What is Economics? Sandy Simoneaux
• Factors of Production Sandy Simoneaux
• Opportunity Cost Sandy Simoneaux
• Elasticity Toni Simonini
• Supply Toni Simonini
• Demand Toni Simonini
• Price Discrimination Toni Simonini
• Monopoly Anthony Rizzo
• Monopolistic Competition Anthony Rizzo
• Profit Anthony Rizzo
• Oligopoly Anthony Rizzo

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History of Apple Computers

• Formed April 1, 1976

• Steve Wozniak and Steve Jobs

• Developed from the Apple I to the iMac

• The Apple II revolutionized the computer
  world in 1977 and reinvented the personal
  computer with the Macintosh in the 1980s.

• The company has a total of 50 retail stores
  located in 24 states and is based in Cupertino,
  California.

• It also has many locations worldwide in both
  North and South America, Japan and Europe.

www.apple-history.com www.apple.com
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What Is Economics?The Science of Choice

• Economics is the study of how society chooses to
  allocate its scarce resources in order to satisfy
  unlimited wants and needs.
• Scarcity A situation in which the amount of
  something available is not sufficient to satisfy
  the desire for it.

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How does economics affect Apple Computers?

• Apple must decide how to allocate its resources
  in order to satisfy present and future wants and
  needs of the company.

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Factors of Production

• Land
• Labor
• Entrepreneurial Activity
• Capital
• Human Capital
• Physical Capital

www.corporate-ir.net
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Opportunity Cost

• Definition of Opportunity Cost-
• The value of the next best alternative which must
  be given up in order to get something.
• Opportunity Cost of Apple Computers-
• Rent
• Revenue

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Opportunity Cost (Cont.)
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ELASTICITY

• Measure of responsiveness.
• ? Quantity Demanded
• ? Price

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Estimates of Elasticity

• The number of closeness of substitutes.
• The fraction of the budget.
• The time period.

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SUPPLY AND DEMAND

• Always remember that a change in price of an item
  will NEVER NEVER NEVER cause a change in the
  Demand or Supply curve. It may cause a change in
  the quantity demanded/supplied of the item.
  - Dr. Gregor
• Change in Demand and Supply curves are caused by
  the ceteris paribus factors.

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SUPPLY

• Supply is the relationship showing the various
  amounts of an item that sellers are willing and
  able to make available for sale at various
  possible alternative prices, during a given
  period of time.
• Price and quantity supplied are positively
  related.

P
Supply
Q
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Ceteris Paribus Factors of Supply

• Input Prices
• - as input prices increase, decrease in supply
  occurs
• Expectations of Sellers
• Technology
• Changes in technology will increase the supply of
  apple computers
• Number of sellers
• - more firms enter the market, the more
  competition.
• Prices of Alternative Goods

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DEMAND
P
Demand

• Demand is the relationship showing the various
  amounts of an item which buyers are willing and
  able to purchase at various possible prices,
  during a given period of time.
• Price and Quantity are inversely related.

Q
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Ceteris Paribus Factors for Demand

• Income
• If the income increases, then demand for apple
  computers increases.
• Number of Consumers
• The more consumers, the greater the demand.
• Tastes
• Expectations of buyers
• Price of related goods

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Demand

• The demand for Apples new wireless computer
  service, Apple 802.11g , has been increasing
  because consumers are more interested in the
  newest and efficient technology rather then
  price.
• Largest demand for Apple 802.11g, would appear to
  be among graphic artists and other design
  professionals.

http//zdnet.com.com/2100-1103-996921.html
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Demand of iMac

• Apples iMac computers were popular in 1998, but
  within the last three years the demand for these
  computers have been declining.
• To increase demand Apple is creating a better
  iMac to meet up to peoples expectations once
  again.

http//www.theinquirer.net/?article7016
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Price Discrimination

• Apple offers discounts to students and faculty of
  educational institutions.
• A certain percentage is deducted from the total
  cost of an item.
• People who dont belong to this group of students
  or teachers are not eligible for a discount.

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Monopolistic Competition

• Two main operating systems Windows and MAC
  Operating system
• Windows operating system is used by most computer
  manufactures. Ex. Gateway, Dell, and Compaq.
• Apple computers are the only ones that use MAC
  Operating system.

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Problems With This

• Macintosh is at a disadvantage because all other
  computer companies use Windows.
• This causes many new software and products to be
  Windows compatible only.
• Therefore, Apple is forced to accept Windows
  programs on their own operating system to stay in
  competition.

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Problems Continued

• Companies that use Windows can sell their
  computers at competitive prices causing Windows
  computers to have lower prices than Apple
  Computers.
• Apple computers must lower their prices in the
  industry to stay in business.
• Windows has no close substitute so to speak.

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Profit

• Accounting Profit
• vs.
• Economic Profit

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Accounting Profit

• Accounting Profit takes into account only
  explicit costs
• Revenue-Total Cost Profit
• Always more than Economic Profit.

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Economic

• Economic Profit takes into account explicit
  and implicit costs
• Economic Profit equals Accounting Profit-Implicit
  Costs

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Examples of Implicit Costs

• The value of land belonging to Apple as reported
  on the SEC filing December 28, 2002 was
  344,000,000.
• The lost revenue from not renting out this land
  to tenants would be an implicit Cost
• Apple Computer has Machinery, equipment and
  software worth - 342,000,000
• The money lost from not leasing this equipment to
  another company is another example of an Implicit
  Cost

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Economic Profit

• An example of The Economic Profit of Apple
  Computer would be its Accounting Profit minus
  implicit costs, such as the money the company
  loses from using its factory instead of renting
  it out.

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Oligopoly

• A market dominated by a small number of firms

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• Since Apple has only a few competitors the market
  that the company is in is considered an oligopoly

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Market Share

• Apple Computer Sales make up 10-20 of the
  computer market share.

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Competitors

• Apple Computers competitors include Dell,
  Gateway, Sony, Hewlett Packard, and Compaq

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Conclusion

• Apple Computers is a company to which we can
  apply the lessons we have learned in
  microeconomics.
• By doing so, we are now able to better understand
  their company.

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Any Questions?