Apple Inc is planning on launching the new iWatch product in April 2015. The Marketing Department has determined the initial demand function by using regression modeling over the last 12 months.
The initial demand function for the iWatch is estimated at Qd = 3,000 – 3P, where Qd is the Quantity Demanded (in thousands) and P is the Price of the iWatch.
The Manufacturing Department has developed a supply model that is represented by the following function: Qs = 5P – 200, where Qs is the Quantity Supplied (in thousands) and P is the Price of the iWatch.
Please graph the Supply and Demand functions and identify the anticipated Market Equilibrium point. In addition, detail the Equilibrium Price and Quantity levels.
If Apple sets the iWatch Price at $250, what will be the associated Quantity (Demanded and Supplied) and the current Market condition? Please explain what should happen next based on the dynamics of the marketplace.
What is the estimate of the maximum Revenue that Apple could expect given the current Demand function?