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| Source: WSJ |
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Tuesday, March 15, 2011
The new I-Pad is thinner and has a camera---The component parts SHOULD cost more, right? Check here to see...
Cost of the inputs that go into producing the I-Pad2, in their totality, have remained about the same as the original I-Pad BUT it is considerably thinner and has a camera. The retail price is going to stay the same as well. Does this pose a problem with calculating the Consumer Price Index? How about GDP? Hint: YES, it does! Extra credit for good answers to these questions...The first I-Pad is coded blue, I-Pad 2 is green.
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Wow. What is the necessity of selling an item for 3 times its manufacturing price?
ReplyDeleteThe graphic does not include all the cost of producing (fixed costs and many other variable costs). Other things like research and development, transportation costs, marketing and advertisingcosts, insurance, taxes, the retail mark-up, the list really goes on and on. Some part of all those costs have to be added to the manufacturing costs noted in the graphic. The FULL cost of producting gets closer to the $729 retail price BUT, make no mistake, the "pure profit" margin is significant (althought I cannot even guesstimate what that might be)...
ReplyDeleteWhen You account for inflation and take the CPI for the input prices you get 101.12 or the new iPad having 1.2% greater input prices. However, both iPads are being sold for the same $729. Does this mean that Apple is actually loosing money on the new and impoved iPad because the retail price is lagging behind the increased input price. With the prices being very similar, I don't see the new iPad drastically impacting GDP. This is because GDP does not necessarily measure the quality of a good (such as having a camera feature or a thinner frame) but measures quantity X price.
ReplyDeleteThe iPad 2 makes GDP calculations problematic because the technology and production possibilities have expanded as components get cheaper, but the price does not increase correspondingly. In addition, the iPad does not increase the Consumer Price Index because the price remains constant, despite the advances in technology.
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