Apple seems to be betting that the nominal price elasticity of demand for the iPhone6 will be even less than it was for the initial offerings of the iPhone 5C and 5S. Or so it seems. There are rumours the price will be $100 higher for the new version of the iPhone when it becomes available in the fall. From Slate:
Jefferies analyst Peter Misek says, “Our checks indicate Apple has started negotiating with carriers on a $100 iPhone 6 price increase. ....
There are two ways to look at this if you’re Apple.
On the one hand, an internal presentation from Apple last year showed that people around the world want cheaper phones with bigger screens. This suggests it needs to cut the price and bump screen size.
However, Apple believes it’s not really susceptible to the pricing pressure of Android phone-makers. The iPad, for example, was originally going to sell for $400, but Apple figured people would pay $100 more, and it was right.
If, in fact, market conditions have changed such that customers who want a new iPhone really want one (even more than customers really wanted the earlier versions), then it will be a profitable move for Apple charge more for their new iPhones.
Econo-geek speak: If they are right, the intersection of the MR and MC curves will occur at a lower q/t, but their revenues will rise and their total costs might even decline. The implication is that Apple is guessing that if they price the iPhone6 the same way they priced the 5s, they would be in or mighty close to the inelastic portion of the demand curve [granting truckloads of assumptions].