27/40

Q#1

Smart watch market is a market in which multiple buyers and sellers interact for the sales and
purchase of smart watches and its features. The buyers can be whole sellers, retailers, common
masses, etc. while sellers include Apple, LG, Motorola, Pebble, Samsung, etc.

Q # 1 (a)

The buyers can be whole sellers, retailers, sportsmen, common masses wishing to use
specialized communications, etc. and they can use for personal assistance and information,
medical and health uses along with nutrition, wellness, and movement tracks, sleep patterns,
etc.

Q # 1 (b)

Sellers include Apple, LG, Motorola, Pebble, Samsung, etc.

1- Samsung

Samsung launched its 5th iteration of its smart watches with the name of Samsung gear live,
which has a feature of 1.63” super amoled 320 x 320 with a heart rate monitor which can
connect via android applications.

2-Motorola

The Motorola launched its Moto 360 with 1.56”, 320x 290 resolution display, and compatible
with Google android wear operating system and can be connected via android application that
could search tweet, make a call, check text, send an email, etc. Now intelligent personal
assistant is also incorporated.

3-Apple

Apple introduced its wearable watch in its sports version. Watch came in three different
versions and can be customized in six unique bands. The owner proclaimed that it would
redefine the people's expectations with this wearable category.

Q # 2 (a)
wrong explanation, -.5
Apple watch is a consumer good as it modifies every year with its iOS version, mobile phones,
smart watches, etc.
Q # 2 (b)

Smart watch industry is a microeconomic topic as this the branch of economics that examines
the functioning of individual industries and the behavior of individual decision-making
units—that is, firms and households.

Q#3

Suppose year is an independent variable, sale is dependent variable. An increase in sales

around 250% is 1750 K (700K*250%=1750K)
1/3
Sales is taken in thousands (k) you should have shown demand/supply for each
market and then shift demands according to the
information
year SmartWatch Traditional
2014 700 700
2015 900 800
2016 1050 1000
2017 1150 1050
2018 1300 1200
2019 1500 1300
2020 1750 1400

Sales Graph
2000
1800
1600
1400
1200
Sales

1000
800 SmartWatch
600 Traditional
400
200
0
2012 2014 2016 2018 2020 2022
Year
Q#4 0.5/3

Consider Price P1 at Quantity demanded Q1 the demand of Apple phones is at D1. As Apple
launches smart watch as a complement its demand jumps up to D0 showing there’s an upward
trend in demand of apple phone.

Ps
Do
D1

P1

Q1 Qo Qd

Q#5

(a)

Dependent variable includes Advertising budget, Price of apple watch, price of Samsung Gear S,
price of pebble watch. -1

(b) Independent Variable includes quantity demand of Apple watch

-1
(c)

1- PAW

-2400 PAW indicates negative sign; negative sign indicates that as the predictor variable
decreases, the response variable also decreases. It is competitive pricing of substitute.
2- P Gears

+1520 P Gears indicates a positive sign; positive sign indicates that as the predictor variable
increases, the response variable also increases, as it is the substitute of Apple, so when Paw
decreases, Pgears increases.

3- P Pebble

+1200 P Pebble indicates a positive sign; positive sign indicates that as the predictor variable
increases, the response variable also increases. It is also a substitute.

4- P iPhone6

-1200 P iphone6 indicates negative sign; it is complementary good for apple watch, so when
price of the substitute goods will increases, P iphone6 will decrease.

5-A

+44 A indicates a positive sign; positive sign indicates that as the predictor variable increases,
the response variable also increases

Q#6

(a)

Qaw= -150000-2400(349)+1520)(380)+1200(220)-1200(299)+44(15500)

Qaw= 177,200

(b)

PAW QAW
300 294800
310 270800
320 246800
349 177200
350 174800
360 150800
380 102800
390 78800
400 54800
(C) -1 label axis on graph

Taking PAW on X-axis and QAW on y-axis, showing downward sloping curve.

PAW QAW
300 294800
310 270800
320 246800
349 177200
350 174800
360 150800
380 102800
390 78800
400 54800

Deamnd Curve
350000

300000

250000

200000

150000 New QAW

100000

50000

0
0 100 200 300 400 500
(d)

1)If prices of the apple watch, increases then demand of the apple watch decrease.

P
5/10 values missing
400

349

I. Increase in price of Gear S from $380 to $400

If Pgears prices increase then demand of the apple watch shift upward because pgears
and apple watch has both are substitutes.

2)

II. Decrease in price of Pebble from $220 to $150

3)

If the prices of the Pebble decrease the demand of the apple watch decreases.

III. Decrease in price of iPhone6 from $299 to $250.

4)
If the price of the apple i-phone6 decreases then demand of the apple watches increase
because it is complementary goods.
P

IV. Increase in Advertising budget from $15,500 to $ 17,000.

5)
If an increase in the budget of advertising, then demand of the apple watch increase.
P

V. What is the marginal cost of producing one more Apple

Watch? In other words, what is the Opportunity Cost to the company of producing one
more Apple Watch?

Ans: The marginal cost is the cost to make an additional unit of a product. So the marginal
cost is equals to variable cost .i.e. 83.70

Q#7

Being based on iOS operating system, Apple has 20% consumers that are willing to shift from
Android to iOS operating system. So, it has to forgo 80% of its consumers who are using smart
wearable.
 (a) Apple entry to smart watch market will decrease the other supplier’s supplies.

-1
Not according to case study. Cost of production is
P S1
likely to fall and availability of components will increase
S
so supply curve will shift outward.

(b) A decrease in the number of medical claim amount as a result of using wearable technology.

(C) In general, everyone would be at ease. People would take medication timely, paying for
groceries, voicing text to friends or family, tracking fitness activities, etc. without digging into
the pocket or purse.

Q#8

A) Samsung

B) US $ 150

C) US $ 100 Without any change in currency FX rate.

D) Smart watch IWO X6 series 5 was US $ 115.

E) Samsung is a famous brand. Other substitute was IWO X6 Series 5

F) Yes

G) It should be around $ 150-170

H) It can be resold around the reduction of 30 % of its cost.

I) I would be losing some new /state of the art modification and technologies.

-1; OC is the resale value forgone if watch is kept