38.

5/40
Excellent!
Q1
A) the buyers in the smart watch market have a demand for it because:
-it provides personal assistance & management functions
-it has medical and healthcare functionality
-it allows for fitness tracking
B) the sellers of Smart Watch include
-Those who specialize in healthcare-based features; jawbone/Fitbit
-who produce smart watches as supporting accessories to smartphones; Samsung
-whose product has a more sports and fitness based technology, Casio
Q2
a) Apple Watch is a consumer good because it is used to achieve personal utility
and does not contribute directly to another product
b) Study of the smartwatch industry is a microeconomic topic as that field is
concerned with the economics of individuals & firms within an industry rather
than an aggregate of industries within an economy.
Q3
Q4

explanation: as seen in the diagram, as the price for smartphones falls, it leads to
a shift in the demand for smartwatches. the concept of complementarity between
2 products is when one is bought, likely the other will be too as they enhance
each other's utility.
b) competition in markets can often come to a point where price itself does not
impact market significantly. in such cases firms use other strategies to entice the
consumers towards their product. One such strategy is accessories, which are
complementary to the main product. When buying a smartphone, consumers will
look to maximize their utility; by creating easy compatibility between their smart
watch and smartphone & giving the smartwatch an attractive price tag, a
company like Samsung can attract consumers of both markets to each other as
well as those who dislike the hassle of keeping up with different companies and
their policies for every product. graph of both (showing shifts for change in attributes)
missing 2.5/3
Q5
A) the quantity demanded per week of Apple Watch is the dependent variable
B) the independent variables are:
-the price of the apple watch
-the price of its substitutes (gear s and pebble)
-the price of the iPhone 6
-the advertising budget of the product for a quarter
C)
i) this is the price of the product and increasing the price leads to a reduction in
demand. due to this negative impact, the sign is negative.
ii) this is the price of a substitute and increasing this makes the Apple Watch
relatively cheaper & demanded more of. due to this positive impact the sign is
positive.
iii) same as ii
iv) this is the price of a compliment & increasing this makes the apple watch
unattractive for those in the market for both & reduces its demand. due to this
negative nature the sign is negative.
v) advertising generates awareness and increases demand for the product. due to
this positive impact it is positive.
Q6
A) Quantity of Apple Watch demanded = 177200 units
Part B, C and D as below
Explanations (D)
i) Increase in the price of Gear S: being a substitute, as the Gear S rises in price, it
makes the Apple Watch relatively cheaper leading to an increase in demand
ii) Decrease in the price of Pebble: being a substitute, as the Pebble’s price falls, it
becomes more attractive to consumers while the Apple Watch looks relatively
expensive, hence demand falls.
iii) Decrease in the price of the iPhone 6: being a compliment, as this product
becomes less expensive, the increasing buyers are also likely to buy the Apple
Watch.
iv) Increase in Advertising budget: as advertising increases, so does awareness
and interest of the product. This will generate greater demand for the Apple
Watch

Q6
83.70 Dollars american
Q7
A) on supply side; this means a greater overall demand for components of
smartwatches which means potential economies of scale and hence greater
quantity produced at the same price. on demand side, increased marketing and
more mainstream awareness of the product would increase demand. Leading to a
greater quantity sold with an uncertain change in price.

B) potential for development of technology that benefits the healthcare sector

through apple's RnD team.
C) Society in general will benefit from innovations in efficiency of technology
motivated from trying to keep smartwatches small. As well as benefit from the
numerous fitness based options invented.
Q8
A) Samsung GearS
B) PKR 20,000/-
C) PKR 21,000/-
D) The smartwatch was bought along with a Samsung smartphone instead of an
iphone 6 that I wanted to buy.
E) Samsung is a trusted company. Its substitutes include Pebble Steel. As for
compliment that is the Samsung smartphone I bought.
F) No.
G) My utility is fulfilled.
H) PKR 12,000/-
I) A newer piece of technology.
-1;
OC is the resale value forgone if watch is kept. In your case
Rs. 12,000