The article shows how Wall Street Journal has tried to prove that the demand of Apple’s Iphone5 has fallen, just because the company cut down the orders of the components used in the manufacturing of the ios device which it outsources.
But the fact actually is that apples sale has not fallen, and in fact its sale has increased since the launch of the new Iphone5 in October 2012.
Analysts and speculators have different views about the demand of the Iphone5.Some speculate that the demand of the ios device has decrease as apple has cut down the order for the components (such as the display screen)to almost half.
In opposition some say that the cut in the spare parts order is due to improved manufacturing yields leading to a fast roll out of the Iphone5.
William Power a famous analyst said that, “Most demand indicators of the iphone5 remain favorable”.
Also in this case Samsung claimed that it had sold 40 million of its flagship “Galaxy S III” smartphones in just & months since it has been launched. Whereas Apple is yet to announce its earnings report for the last three months of 2012 on January 2013. It is expected that the sale of the Iphone5 will be between 40-45 million in just #months since its launch in October 2012.
Law of Demand-
The law of demand states that, “Other things remaining the same (ceteris paribus) , higher the price of a good smaller is the quantity demanded”, i.e. There is an inverse relationship between the price of a good and its quantity demanded.
So in this case assuming that there is an increase in the price of Iphone5 its demand will fall down and vice-versa.
(Put in a graph)
Substitution effect occurs when the relative price of a good or service raises in this case Iphone5, due to which people seek substitutes for it, so the quantity demanded of that good or service decreases. Finally resulting to an increase in the quantity demanded of the substitute good in this case the Samsung Galaxy S III.