I would say that when I think of a company that has inelastic demand on their products it would have to be Apple. Apple charges above average prices for their phones, computers and music players all with the marketing strategy of superior quality. When a company achieves inelastic demand it is because of two possible reasons. They have either developed highly differentiated products or brands or they have achieved a monopoly on a market or product category. (Tedesco, 2011) If you look at Apple they have a combination of both. You wouldn’t necessarily label Apple as a monopoly but they do possess a large amount of influence on how other tech companies develop their products. This is shown in various lawsuits that have been brought by Apple against other tech companies for patent violations. Apple has however developed superior products in comparison to others. Apple has marketed their high-end electronic devices to the point that they can introduce similar devices every few months and make people think that they are improved enough over the older models to constitute a needed upgrade. The marketing is brilliant. If I was talking to the president of Apple about what their pricing strategies should be I would bring up the possibility of a downgraded model to reach the customer base who can’t afford $600 every few months for a new phone or tablet. Even though Apple has monopolized on the higher income customer base they have untapped potential in the lower to middle income customer base.
Cell phones are deemed as a necessity by many and if the price is right most consumers will spend the money on a product that is considered superior to others in the marketplace. While researching different articles for this assignment I came across an article about the elastic demand of sports tickets, especially Super Bowl tickets. When I was trying to think of a company with elastic demand, the NFL never crossed my mind but the NFL is a profit generating entity. The article cited the difference in ticket prices in tier seating between the Super Bowl in New York City and the Super Bowl in New Orleans. The prime examples showed that club-level tickets at MetLife Stadium would cost $1400 more than the similar seats at the Super Bowl in New Orleans. The article attributed this to the marketability of the venue. The author stated that most sports teams price their ticket inventories in the inelastic portion of their demand function because,” teams charge too low a price to maximize ticket revenues. Part of the strategy in doing this is to ensure maximum attendance so as to ensure greater revenue streaming from complementary purchases associated with sporting attendance…such as concessions, parking, and merchandise.” (Rishe, 2013) If I were to talk to the president of the NFL I would suggest putting a cap on Super Bowl tickets so that a more diverse group of fans could attend the Super Bowl. As of now the only fans that attend a Super Bowl are the fans with a large amount of expendable income. If tickets were more attainable by the “common” fan they would generate as much money but also accommodate a much wider consumer market.
Rishe, P. (2013, September 19). SuperBowl XLVIII Pricing: A Lesson In Demand Elasticity. Retrieved September 27, 2014, from Forbes.com: http://www.forbes.com/sites/prishe/2013/09/19/super-bowl-xlviii-pricing-a-lesson-in-demand-elasticity/ Tedesco, T. (2011, May 20). View from Mount Olympus. Retrieved September 26, 2014, from piworld.com: http://www.piworld.com/blog/inelasticity-demand-your-printing-services-pricing-strategy-tj-tedesco Tucker, I. B. (2013). Survey of Economics (8th ed.). Mason, Ohio, United States of America.