How real life business affects and relates to economics: iPhone 5 is expensive........or not?

Why is iPhone 5 so popular despite of its expensive price?

Apple's iPhone 5 and its strong competitor's Samsung Galaxy SIII.

What makes iPhone 5 stands out from the crowd?

Since the long-awaited release of iPhone 5 by Apple – the top-selling smartphone among the other brands, Apple announced that the demand of the public for it has exceeded its initial supply unexpectedly. Due to that, customers that can start to pre-order the smartphone of the year since 14 of September have to wait until October to finally lay their hands on it. As comparisons between the sales of all the iPhones released by Apple, it is found that since the release of its first iPhone on June 2007, the selling rates and speed of their following iPhones is constantly increasing that in the first 24-hours of taking preorders iPhone 5, more than 2 million of iPhone 5 are sold.

The new iPhone 5 is undeniably a smartphone that functions really well, however, other competitors such as Samsung and HTC also introduced smartphones of similar functions. Therefore, its barely about functionality of the phone that causes its popularity among the public. Before we step into deeper, let me explain some terms to be used here. The definition of price elasticity stands for the sensitivity of the price of a product by the consumers. This means how strong is the influence of price to a customer while purchasing and it is generally divided into three major types:

- Elastic demand, where a change in the price brings a big change in the quantity demanded.
- Inelastic demand, where a change in the price brings a moderate change in the quantity demanded.
- Unit elastic demand, where a change in the price brings an equal change in the quantity demanded.

Now, the reason why iPhone 5 can have increasing sales and popularity in despite of the increase in the price for every generation of the iPhone is because the customers of Apple are less elastic to the price of the smartphones. This means that the price of iPhone 5 is not an extreme issue to the customers in making their purchasing decision.

Why is it so? There are a few determinants that can influence the customers to be more willing to pay, or to be more insensitive of the price for iPhone 5.

Pageview from Apple's official website on the date of release.

This thing is due to the fact that the public now views smartphones as a necessity rather than a luxurious good even though its price is relatively high. Before the introduction of smartphones, the requirement on a phone is the enabling of calls and messages. However, the introduction of smartphones and its extraordinary functions compared to the normal cellphone causes the norm and view of society to treat smartphone as a daily essential. No one knew that the influence the revolution of the technology, the touchscreen could be such a big issue to change the society’s view. Since its becoming more common and people think iPhone is a need instead of a want, it becomes a fairly elastic demand and people is more willing to pay in obtaining this product.

Besides that, the availability of comparable substitutes is another factor that plays a great role in causing the customers to purchase this smartphone. The attention grabbed from that audience is not purely on the ‘fans‘ of the brand Apple, however, it has also gotten attention from users of smartphones such as Blackberry and Android. In the sector of smartphone manufacturers, brands that are of the standard in terms of their popularity are very little. The famous competitors in the market of Apple smartphones include the Blackberry, HTC, Windows and Samsung. Therefore, it can be concluded that the audience with similar requirements on smartphones will only consider these few brands listed. From this small variety of smartphones and the added advantage that iPhone receives great review from customers, people will put it on top of the list even though it is more expensive.

Lastly, the purchase and owning of iPhone is now becoming a trend. It is viewed as a buy that shows the personal preference and social status of the customers’. As mentioned in the article, “Still, analysts expect customers to line up days in advance at Apple stores to purchase one of the new black or white phones, just for bragging rights to say they got it on release day.” From that, it is clear that many people are concerned of the ability to show off especially with the transparent social websites such as (Facebook and Twitter) nowadays. Thus, the behavior and the attitude of the society that think being on trend is more important instead of the price of the product causes them to be less elastic of iPhone’s price.

As we come to the ending of this post, I think all that the popularity, the amount of sales that is gained through the introduction of the new iPhone 5 is definitely not solely due to its functionality. As we live in the modern era of technology, it is understandable for the customers to feel inelastic of the price of iPhone as it is viewed as a necessity, especially when the amount close substitute is not high. Since the view of the society of it as a trend is the reason for some of the people in purchasing it as analyzed, I predict that when another trend is introduced and Apple doesn’t get the chance to receive it by chance, the iPhone will not be able to stand as the top-selling phone anymore.