How Much Should the New Iphone Cost?

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Tat Yin Chen ACC1012 Case Study 1 November 2013 The price is right: How much should the new iPhone cost? Introduction In September 2013, the iPhone 5S was released, people are expecting the iPhone 6 which will release in mid-2014. Apple is now creating the iPhone 6 and wants to reach the sales goal of 20 million units. Doing this case study is to establish a best price for the iPhone 6 on research and calculations. In this case study, I simply using linear functions as a tool to find out the best price for the iPhone 6. There are two linear functions which represent the supply and demand of the iPhone 6, and I will find out the intersection point of these two lines and that point will be the best price. The linear function of production (supply) If the iPhone 6 was sold at £550, the production department estimated that they would only be able to produce 10 million units. So, the point A (10,550) will be one of the points on the linear function. The selling price of iPhone 6 would have to be at least £700 for enough phones to be produced for Apple to reach its sales goal (20 million units). It is point B (20,700). The equation of the line: (Y-550)/(x-10) = (700-550)/ (20-10) Y-550 =15x-150 Y =15x+400 The linear function of Sales (demand) The pricing team made the estimate that 20 million sales of the iPhone 6 would only be reached if the price was at most £500, and that if the iPhone 6 was sold at £700, sales would only reach 4 million. So the two points are (4,700) and (20,500). The equation of the line: (Y-500)/(x-20) = (700-500)/ (4-20) Y-500 = -12.5+250 Y =-12.5x+750 The intersection point The two equations: y=15x+400…….1 y=-12.5x+750……2 15x+400=y=-12.5x+750 27.5x = 350 x=12.727 million units Sub x=12.727 million units into 1 y=15(12.727) +400 y=590.909 pound So the

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