# Introduction:

In economics, profit maximization is the process by which a firm determines

the price and output level that returns the greatest profit. There are several approaches to this problem. The total revenuetotal cost method relies on the fact that profit equals revenue minus cost, and the marginal revenuemarginal cost method is based on the fact that total profit in perfectly market reaches its maximum point where marginal revenue equals marginal cost. Any costs incurred by a firm may be classed into two groups: fixed costs and variable costs. Fixed costs are incurred by the business at any level of output, including zero output. These may include equipment maintenance, rent, wages, and general upkeep. Variable costs change with the level of output, increasing as more products is generated. Materials consumed during production often have the largest impact on this category. Fixed cost and variable cost, combined, equal total cost. Revenue is the amount of money that a company receives from its normal business activities, usually from the sale of goods and services. Marginal cost and revenue, depending on whether the calculus approach is taken or not, are defined as either the change in cost or revenue as each additional unit is produced, or the derivative of cost or revenue with respect to quantity output. It may also be defined as the addition to total cost or revenue as output increase by a single unit. A firm maximizes profit by operating where marginal revenue equal marginal costs. A change in fixed costs has no effect on the profit maximizing output or price. The firm merely treats short term fixed costs as sunk costs and continues to operate as before. This can be confirmed graphically. Using the diagram illustrating the total cost total revenue method the firm maximizes profits at the point where the slope of the total cost line and total revenue line are equal. A change in total cost would cause the total cost curve to shift up by the amount of the change. There would be no effect on the total revenue curve or the shape of the total cost curve. Consequently, the profit maximizing point would remain the same. This point can also be illustrated using the diagram for the marginal revenue marginal cost method. A change in fixed cost would have no effect on the position or shape of these curves.

The general rule is that firm maximizes profit by producing that quantity of output where marginal revenue equals marginal costs. The profit maximization issue can also be approached from the input side. That is, what is the profit maximizing usage of the variable input. To maximize profits the firm should increase usage "up to the point where the input's marginal revenue product equals its marginal costs". So mathematically the profit maximizing rule is MRPL = MCL. The marginal revenue product is the change in total revenue per unit change in the variable input assumes labor. That is MRPL = TR/L. MRPL is the product of marginal revenue and the marginal product of labor or MRPL = MR x MPL. A smartphone is a high-end mobile phone built on a mobile computing platform, with more advanced computing ability and connectivity than a contemporary feature phone.[1][2][3] The first smartphones were devices that mainly combined the functions of a personal digital assistant (PDA) and a mobile phone or camera phone. Today's models also serve to combine the functions of portable media players, low-end compact digital cameras, pocket video cameras, and GPS navigation units. Modern smartphones typically also include highresolution touchscreens, web browsersthat can access and properly display standard web pages rather than just mobile-optimized sites, and high-speed data access via Wi-Fi and mobile broadband. The iPhone retroactively labeled the original iPhone, iPhone 2G, or iPhone EDGE was the first generation of iPhone designed and marketed by Apple Inc. and was succeeded by the iPhone 3G. It was announced on January 9, 2007 after months of rumors and speculation. It was introduced in the United States on June 29, 2007. It featured quadband GSM with GPRS and EDGE. The original iPhone's design was centered on a 3.5 inches (89 mm) glass multi-touch touchscreen display. The original iPhone introduced five physical buttons that have remained consistent over newer generations of iPhone. The device featured a chrome plated metal frame. The back of which was made of brushed aluminum with a black plastic base, required because metal shields cellular and Wi-Fi signals. The camera was located in the upper-left corner of the iPhone's rear. The headphone socket was recessed into the casing, making it incompatible with most headsets without the use of an adapter. Other models do not have this issue. To profit maximization of IPHONE, we take some step for that. Here explain all of that:

# How much to produce:

Product produce is depend on development of this product In business and engineering, new product development (NPD) is the term used to describe the complete process of bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible (that is, something physical you can touch) or intangible (like a service, experience, or belief). There are two parallel paths involved in the NPD process: one involves the idea generation, product design and detail engineering; the other involves market research and marketing analysis. Companies typically see new product development as the first stage in generating and commercializing new products within the overall strategic process of product life cycle management used to maintain or grow their market share. The process of IPHONE product produce generate as:
1.

Idea Generation is often called the "fuzzy front end" of the NPD process Ideas for new products can be obtained from basic research using a SWOT analysis (Strengths, Weaknesses, Opportunities & Threats), Market and consumer trends, company's R&D department, competitors, focus groups, employees, salespeople, corporate spies, trade shows, or Ethnographic discovery methods (searching for user patterns and habits) may also be used to get an insight into new product lines or product features.

Lots of ideas are being generated about the new product. Out of these ideas many

ideas are being implemented. The ideas use to generate in many forms and their generating places are also various. Many reasons are responsible for generation of an idea.

Idea Generation or Brainstorming of new product, service, or store concepts - idea

generation techniques can begin when you have done your OPPORTUNITY ANALYSIS to support your ideas in the Idea Screening Phase (shown in the next development step). 2.

Idea Screening The object is to eliminate unsound concepts prior to devoting resources to them. The screeners should ask several questions:

Will the customer in the target market benefit from the product? What is the size and growth forecasts of the market segment/target What is the current or expected competitive pressure for the product idea? What are the industry sales and market trends the product idea is based Is it technically feasible to manufacture the product? Will the product be profitable when manufactured and delivered to the

market?

on?

customer at the target price? 3.

Concept Development and Testing Develop the marketing and engineering details

Investigate intellectual property issues and search patent data bases Who is the target market and who is the decision maker in the purchasing What product features must the product incorporate? What benefits will the product provide? How will consumers react to the product? How will the product be produced most cost effectively? Prove feasibility through virtual computer aided rendering, and rapid What will it cost to produce it?

process?

prototyping

Testing the Concept by asking a sample of prospective customers what they think Business Analysis

of the idea. Usually via Choice Modelling. 4.

Estimate likely selling price based upon competition and customer feedback Estimate sales volume based upon size of market and such tools as the FourtEstimate profitability and break-even point Beta Testing and Market Testing

Woodlock equation

5.

Produce a physical prototype or mock-up

Test the product (and its packaging) in typical usage situations Conduct focus group customer interviews or introduce at trade show Make adjustments where necessary Produce an initial run of the product and sell it in a test market area to determine Technical Implementation

customer acceptance 6.

New program initiation Finalize Quality management system Resource estimation Requirement publication Publish technical communications such as data sheets Engineering operations planning Department scheduling Supplier collaboration Logistics plan Resource plan publication Program review and monitoring Contingencies - what-if planning Commercialization (often considered post-NPD)

7.

Launch the product Produce and place advertisements and other promotions Fill the distribution pipeline with product Critical path analysis is most useful at this stage New Product Pricing

8.

Impact of new product on the entire product portfolio Value Analysis (internal & external) Competition and alternative competitive technologies Differing value segments (price, value, and need) Product Costs (fixed & variable) Forecast of unit volumes, revenue, and profit

# What input to be used and in what quantity:

Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium of price and quantity. The four basic laws of supply and demand are: 1. 2. 3. 4. If demand increases and supply remains unchanged, then it leads to higher If demand decreases and supply remains unchanged, then it leads to lower If supply increases and demand remains unchanged, then it leads to lower If supply decreases and demand remains unchanged, then it leads to higher price

equilibrium price and quantity. equilibrium price and quantity. equilibrium price and higher quantity. and lower quantity. The inputs or resources used in the production process are called factors of production by economists. The myriad of possible inputs are usually grouped into five categories. These factors are:

Raw materials Machinery Labor services Capital goods Land

In the long run, all of these factors of production can be adjusted by management. The short run, however, is defined as a period in which at least one of the factors of production is fixed. A fixed factor of production is one whose quantity cannot readily be changed. Examples include major pieces of equipment, suitable factory space, and key managerial personnel.

A variable factor of production is one whose usage rate can be changed easily. Examples include electrical power consumption, transportation services, and most raw material inputs. In the short run, a firms scale of operations determines the maximum number of outputs that can be produced. In the long run, there are no scale limitations. IPHONE input used and quantity: Screen and input The touchscreen is
[41]

9 cm

(3.5 in) liquid

crystal

display with

scratch-resistant

glass.

The capacitive touchscreen is designed for a bare finger, or multiple fingers for multi-

touch sensing. The screens on the first three generations have a resolution of 320 480 (HVGA) at 163 ppi, while that of iPhone 4 and iPhone 4S has a resolution of 640 960 at 326 ppi. The touch and gesture features of the iPhone are based on technology originally developed by FingerWorks. Most gloves and styluses prevent the necessary electrical conductivity; however, capacitive styli can be used with iPhone's finger-touch screen. The iPhone 3GS and later also feature a fingerprint-resistant oleophobic coating. The top and side of the iPhone 3GS, externally identical to the iPhone 3G. The switches were black plastic on the original model. From left to right, sides: wake/sleep button, SIM card slot, headphone jack, silence switch, volume controls. Top: earpiece, screen. The iPhone has a minimal hardware user interface, featuring only four or five buttons, depending on the generation. The only physical menu button is situated directly below the display, and is called the "Home button" because it closes the active app and navigates to the home screen of the interface. The home button is denoted not by a house, as on many other similar devices, but a rounded square, reminiscent of the shape of icons on the home screen. A multifunction sleep/wake button is located on the top of the device. It serves as the unit's power button, and also controls phone calls. When a call is received, pressing the sleep/wake button once silences the ringtone, and when pressed twice transfers the call to voicemail. Situated on the left spine are the volume adjustment controls. The iPhone 4 has two separate circular buttons to increase and decrease the volume; all earlier models house two switches under a single plastic panel, known as a rocker switch, which could reasonably be counted as either one or two buttons. Directly above the volume controls is a ring/silent switch that when engaged mutes telephone ringing,

alert sounds from new & sent emails, text messages, and other push notifications, camera shutter sounds, Voice Memo sound effects, phone lock/unlock sounds, keyboard clicks, and spoken autocorrections. This switch does not mute alarm sounds from the Clock application, and in some countries or regions it will not mute the camera shutter or Voice Memo sound effects.
[48]

All buttons except Home were made of plastic on the original iPhone and metal on all later

models. The touchscreen furnishes the remainder of the user interface. The display responds to three sensors (four on the iPhone 4). A proximity sensor deactivates the display and touchscreen when the device is brought near the face during a call. This is done to save battery power and to prevent inadvertent inputs from the user's face and ears. An ambient light sensor adjusts the display brightness which in turn saves battery power. A 3axis accelerometer senses the orientation of the phone and changes the screen accordingly, allowing the user to easily switch between portrait and landscapemode.[49] Photo browsing, web browsing, and music playing support both upright and left or right widescreen orientations.
[50]

Unlike the iPad, the iPhone does not rotate the screen when turned upside-down, with the

Home button above the screen, unless the running program has been specifically designed to do so. The 3.0 update added landscape support for still other applications, such as email, and introduced shaking the unit as a form of input. [51][52] The accelerometer can also be used to control third-party apps, notably games. The iPhone 4 also includes a gyroscopic sensor, enhancing its perception of how it is moved. A software update in January 2008 allowed the first-generation iPhone to use cell tower and WiFi network locations trilateration, despite lacking GPS hardware. The iPhone 3G, 3GS and 4 employ A-GPS, and the iPhone 3GS and 4 also have a digital compass.[55] iPhone 4S supports GLONASS global positioning system in addition to GPS. Audio and output One of two speakers (left) and the microphone (right) surround the dock connector on the base of the original iPhone. If a headset is plugged in, sound is played through it instead. The bottom of the iPhone sports a speaker (left) and a microphone (right) flanking the dock connector. One loudspeaker is located above the screen as an earpiece, and another is located on the left side of the bottom of the unit, opposite a microphone on the bottom-right. The iPhone 4 includes an additional microphone at the top of the unit for noise cancellation, and switches the

placement of the microphone and speaker on the base on the unitthe speaker is on the right. Volume controls are located on the left side of all iPhone models and as a slider in the iPod application. The 3.5 mm TRRS connector for the headphones is located on the top left corner of the device. The headphone socket on the original iPhone is recessed into the casing, making it incompatible with most headsets without the use of an adapter.[58][59] Subsequent generations eliminated the issue by using a flush-mounted headphone socket. Cars equipped with an auxiliary jack allow for handsfree use of the iPhone while driving as a substitute forBluetooth. While the iPhone is compatible with normal headphones, Apple provides a headset with additional functionality. A multipurpose button near the microphone can be used to play or pause music, skip tracks, and answer or end phone calls without touching the iPhone. A small number of third-party headsets specifically designed for the iPhone also include the microphone and control button. The current headsets also provide volume controls, which are only compatible with more recent models. These features are achieved by a fourth ring in the audio jack that carries this extra information. The built-in Bluetooth 2.x+EDR supports wireless earpieces and headphones, which requires the HSP profile. Stereo audio was added in the 3.0 update for hardware that supports A2DP.[51]
[52]

While non-sanctioned third-party solutions exist, the iPhone does not officially support

the OBEX file transfer protocol. The lack of these profiles prevents iPhone users from exchanging multimedia files, such as pictures, music and videos, with other bluetooth-enabled cell phones. Composite or component video at up to 576i and stereo audio can be output from the dock connector using an adapter sold by Apple. iPhone 4 also supports 1024x768 VGA output without audio, and HDMI output, with stereo audio, via dock adapters. The iPhone did not support voice recording until the 3.0 software update. Battery Replacing the battery requires opening the iPhone unit and exposing the internal hardware The iPhone features an internal rechargeable lithium-ion battery. Like an iPod, but unlike most other mobile phones, the battery is not user-replaceable.[58][67]The iPhone can be charged when

connected to a computer for syncing across the included USB to dock connector cable, similar to charging an iPod. Alternatively, a USB to AC adapter (or "wall charger," also included) can be connected to the cable to charge directly from an AC outlet. A number of third-party accessories (car chargers, portable chargers, battery cases, stereo dock chargers, and even solar chargers) are also available. Apple runs tests on preproduction units to determine battery life. Apple's website says that the battery life "is designed to retain up to 80 percent of its original capacity after 400 full charge and discharge cycles" which is comparable to iPod batteries. The battery life of early models of the iPhone has been criticized by several technology journalists as insufficient and less than Apple's claims. This is also reflected by a J. D. Power and Associates customer satisfaction survey, which gave the "battery aspects" of the iPhone 3G its lowest rating of 2 out of 5 stars. If the battery malfunctions or dies prematurely, the phone can be returned to Apple and replaced for free while still under warranty. The warranty lasts one year from purchase and can be extended to two years with AppleCare. The battery replacement service and its pricing was not made known to buyers until the day the product was launched, it is similar to how Apple (and third parties) replace batteries for iPods. The Foundation for Taxpayer and Consumer Rights, a consumer advocate group, has sent a complaint to Apple and AT&T over the fee that consumers have to pay to have the battery replaced. Since July 2007, third-party battery replacement kits have been available at a much lower price than Apple's own battery replacement program. These kits often include a small screwdriver and an instruction leaflet, but as with many newer iPod models the battery in the original iPhone has been soldered in. Therefore a soldering iron is required to install the new battery. The iPhone 3G uses a different battery fitted with a connector that is easier to replace. The iPhone 4 is the first generation to have two cameras. The LED flash for the rear-facing camera (top) and the forward-facing camera (bottom) are both unique to that model. Camera The original iPhone and iPhone 3G feature a built-in Fixed focus 2.0 megapixel camera located on the back for still digital photos. It has no optical zoom, flash or autofocus, and does not

support video recording (iPhone 3G does support video recording via third-party App available on the App Store), however jailbreaking allows users to do so. Version 2.0 of iPhone OS introduced the capability to embed location data in the pictures, producing geocoded photographs. The iPhone 3GS has a 3.2 megapixel camera, manufactured by OmniVision, featuring autofocus, auto white balance, and auto macro (up to 10 cm). It is also capable of capturing 640x480 (VGA resolution) video at 30 frames per second, although compared to higher-end CCD based video cameras it does exhibit the rolling shutter effect. The video can then be cropped on the device itself and directly uploaded to YouTube, MobileMe, or other services The iPhone 4 introduced a 5.0 megapixel camera (2592x1936 pixels), also located on the back, which is equipped with a backside illuminated sensor capable of capturing pictures in low-light conditions, as well as an LED flash capable of staying lit for video recording at 720p resolution, consideredhigh-definition. iPhone 4 is the first iPhone that has the high dynamic range photography feature. In addition the iPhone 4 has a second camera on the front capable of VGA photos and SD video recording. Regardless of the source, saved recordings may be synced to the host computer, attached to email, or (where supported) sent by MMS. Videos may be uploaded to YouTube directly. The camera on the iPhone 4S is capable of shooting 8MP stills and recording 1080p videos. The camera can now be accessed directly from the lock screen, and the volume up button as a shutter trigger. The built-in gyroscope is able to stabilize the camera while recording video. Beta code pulled from iOS 5 suggests that the next feature to be released will allow users to capture a panoramic photo on their iPhone. On all five model generations, the phone can be configured to bring up the camera app by quickly pressing the home key twice. On all iPhones running iOS 5 it can also be accessed from the lock screen directly. Storage and SIM An iPhone 3G with the SIM slot open. The SIM ejector tool is still placed in the eject hole.

The iPhone was initially released with two options for internal storage size: 4 GB or 8 GB. On September 5, 2007, Apple discontinued the 4 GB models. On February 5, 2008, Apple added a 16 GB model.[87] The iPhone 3G was available in 16 GB and 8 GB. The iPhone 3GS came in 16 GB and 32 GB variants and still is available in 8 GB. The iPhone 4 is available in 16 GB and 32 GB variants, as well as a newly introduced 8 GB variant to be sold along side the iPhone 4S at a reduced price point. The iPhone 4S is available in three sizes: 16 GB, 32 GB and 64 GB. All data is stored on the internal flash drive; the iPhone does not support expanded storage through a memory card slot, or the SIM card. GSM Models of the iPhone use a SIM card to identify themselves to the GSM network. The SIM sits in a tray, which is inserted into a slot at the top of the device. The SIM tray can be ejected with a paperclip or the "SIM eject tool" (a simple piece of die-cut sheet metal) included with the iPhone 3G and 3GS.[88][89] In most countries, the iPhone is usually sold with a SIM lock, which prevents the iPhone from being used on a different mobile network.[90] The GSM iPhone 4 features a MicroSIM card that is located in a slot on the right side of the device. The CDMA model of the iPhone, like all CDMA phones, does not use a SIM. Liquid contact indicators The iPhone is equipped with liquid contact indicators which change from white to red in color when they come in contact with water. These suggest whether water damage has affected the device. The indicators on the iPhone include a small disc which is located at the bottom of the headphone jack and with the iPhone 3G and all later models an additional one is located at the bottom of the dock connector. The indicators are often used by Apple employees to determine whether the device qualifies for a warranty repair or replacement. If the indicators show that the device was exposed to water, they may determine that the device is not covered by Apple. However, the liquid contact indicators may be triggered through routine use, and if a device is worn while exercising, the sweat from an owner may dampen the indicators enough to indicate water damage. On many other mobile phones from different manufacturers, the liquid contact indicators are located in a protected location, such as beneath the battery behind a battery cover, but the indicators on an iPhone are directly exposed to the environment. This has led to criticism of the placement of the indicators, which may also be affected by steam in a bathroom or other

light environmental moisture. In response to these criticisms, Apple made a silent change to their water damage policy for iPhones and similar products. This new policy allows the customer to request further internal inspection of the phone to verify if internal liquid damage sensors were triggered. Included items The contents of the box of an iPhone 4. From left to right: iPhone 4 in plastic holder, written documentation, and (top to bottom) headset, USB cable, wall charger. All iPhone models include written documentation, and a dock connector to USB cable. The original and 3G iPhones also came with a cleaning cloth. The original iPhone included stereo headset (earbuds and a microphone) and a plastic dock to hold the unit upright while charging and syncing. The iPhone 3G includes a similar headset plus a SIM eject tool (the original model requires a paperclip). The iPhone 3GS includes the SIM eject tool and a revised headset, which adds volume buttons (not functional with previous iPhone versions). The iPhone 3G and 3GS are compatible with the same dock, sold separately, but not the original model's dock. All versions include a USB power adapter, or "wall charger," which allows the iPhone to charge from an AC outlet. The iPhone 3G and iPhone 3GS sold in North America, Japan, Colombia, Ecuador, or Peru include an ultracompact USB power adapter.

# What prices to charge :

Pricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a fundamental aspect of financial modeling and is one of the four Ps of the marketing mix. The other three aspects are product, promotion, and place. Price is the only revenue generating element amongst the four Ps, the rest being cost centers. Pricing is the manual or automatic process of applying prices to purchase and sales orders, based on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or lines, and many others. Automated systems require more setup and maintenance but may prevent

pricing errors. The needs of the consumer can be converted into demand only if the consumer has the willingness and capacity to buy the product. Thus pricing is very important in marketing. Step 1 Choose a reasonable price for your product, and estimate how much of your product you will sell for that price. Calculate the profit that will result for these estimates. For example, if you are opening a gourmet coffee shop, you may charge $2 for a cup of brewed coffee and expect to sell 1,000 cups per day. If your costs per cup are 50 cents, your profit is 1,000 x $1.50, or $1,500 per day. Step 2 Select a higher price for your product, and revise your sales estimate (usually downward) accordingly. For example, if you raise your price to $3 per cup, you may sell half as many cups if there is nearby competition. Your profits in this case are 500 x $2.50, or $1,250. You make more per cup, but your overall profits drop. Step 3 Lower the price of your product, and increase your sales estimates accordingly. If you sell a great cup of coffee for $1, you can expect to see customers lining out the door—but there are only so many customers you can fit in your shop at any one time. Some of them may give up and go to the more expensive coffee shop on the next block. If you double your sales, you sell 2,000 cups of coffee, but you only make 2,000 x 50 cents, or $1,000. Step 4 Consider external factors that may affect your sales. For example, perhaps you raise your price to $5 per cup, and you explain (truthfully) to your customers that it is because you are using a particularly exclusive coffee preparation method. Your costs rise to $1 per cup, but your profits are now $4. If you sell 400 cups, your profits are $1,600, which are higher than your initial estimate of $1,500 from selling 1,000 cups of $2 coffee. And servicing only 40 percent as many customers may have other benefits, such as a much less tiring day. Step 5 Continue developing price points and sales figures until you determine which mix maximizes your profits. Then test your estimates against actual sales, and revise accordingly. For selection the prices there some rule has been followed. Here Describe that:

# Competition based pricing: Setting the price based upon prices of the similar competitor products. Competitive pricing is based on three types of competitive product:

Products have lasting distinctiveness from competitor's product. Here we can assume

The product has low price elasticity. The product has low cross elasticity. The demand of the product will rise.

Products have perishable distinctiveness from competitor's product, assuming the product Products have little distinctiveness from competitor's product. assuming that:

features are medium distinctiveness.

The product has high price elasticity. The product has some cross elasticity. No expectation that demand of the product will rise.

# Cost Plus Pricing: Cost-plus pricing is the simplest pricing method. The firm calculates the cost of producing the product and adds on a percentage (profit) to that price to give the selling price. This method although simple has two flaws; it takes no account of demand and there is no way of determining if potential customers will purchase the product at the calculated price. This appears in 2 forms, Full cost pricing which takes into consideration both variable and fixed costs and adds a % markup. The other is Direct cost pricing which is variable costs plus a % markup, the latter is only used in periods of high competition as this method usually leads to a loss in the long run. # Creaming or skimming : Selling a product at a high price, sacrificing high sales to gain a high profit, therefore skimming the market. Usually employed to reimburse the cost of investment of the original research into the product: commonly used in electronic markets when a new range, such as DVD players, are firstly dispatched into the market at a high price. This strategy is often used to target "early adopters" of a product or service. These early adopters are relatively less price-sensitive because either their need for the product is more than others or they understand

the value of the product better than others. In market skimming goods are sold at higher prices so that fewer sales are needed to break even. This strategy is employed only for a limited duration to recover most of investment made to build the product. To gain further market share, a seller must use other pricing tactics such as economy or penetration. This method can come with some setbacks as it could leave the product at a high price to competitors. # Limit Pricing: A limit price is the price set by a monopolist to discourage economic entry into a market, and is illegal in many countries. The limit price is the price that the entrant would face upon entering as long as the incumbent firm did not decrease output. The limit price is often lower than the average cost of production or just low enough to make entering not profitable. The quantity produced by the incumbent firm to act as a deterrent to entry is usually larger than would be optimal for a monopolist, but might still produce higher economic profits than would be earned under perfect competition. The problem with limit pricing as strategic behavior is that once the entrant has entered the market, the quantity used as a threat to deter entry is no longer the incumbent firm's best response. This means that for limit pricing to be an effective deterrent to entry, the threat must in some way be made credible. A way to achieve this is for the incumbent firm to constrain itself to produce a certain quantity whether entry occurs or not. An example of this would be if the firm signed a union contract to employ a certain (high) level of labor for a long period of time. # Loss Leader: A loss leader or leader is a product sold at a low price (at cost or below cost) to stimulate other profitable sales. # Market Oriented Pricing: Setting a price based upon analysis and research compiled from the targeted market. This means that marketers will set prices depending on the results from the research. For instance if the competitors are pricing their products at a lower price, then its up to them to either price their goods at an above price or below, depending on what the company wants to achieve # Penetration Pricing: Setting the price low in order to attract customers and gain market share. The price will be raised later once this market share is gained.[2]

# Price discrimination: Setting a different price for the same product in different segments to the market. For example, this can be for different ages or for different opening times, such as cinema tickets. # Premium Pricing: Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price. The practice is intended to exploit the (not necessarily justifiable) tendency for buyers to assume that expensive items enjoy an exceptional reputation or represent exceptional quality and distinction. # Contribution Margin Based Pricing: Contribution margin-based pricing maximizes the profit derived from an individual product, based on the difference between the product's price and variable costs (the product's contribution margin per unit), and on ones assumptions regarding the relationship between the products price and the number of units that can be sold at that price. The product's contribution to total firm profit (i.e., to operating income) is maximized when a price is chosen that maximizes the following: (contribution margin per unit) X (number of units sold). # Psychological Pricing: Pricing designed to have a positive psychological impact. For example, selling a product at $3.95 or $3.99, rather than $4.00. # Dynamic Pricing: A flexible pricing mechanism made possible by advances in information technology, and employed mostly by Internet based companies. By responding to market fluctuations or large amounts of data gathered from customers - ranging from where they live to what they buy to how much they have spent on past purchases - dynamic pricing allows online companies to adjust the prices of identical goods to correspond to a customers willingness to pay. The airline industry is often cited as a dynamic pricing success story. # Price leadership: An observation made of oligopoly business behavior in which one company, usually the dominant competitor among several, leads the way in determining prices, the others soon following. # Target Pricing: Pricing method whereby the selling price of a product is calculated to produce a particular rate of return on investment for a specific volume of production. The target pricing

method is used most often by public utilities, like electric and gas companies, and companies whose capital investment is high, like automobile manufacturers. Target pricing is not useful for companies whose capital investment is low because, according to this formula, the selling price will be understated. Also the target pricing method is not keyed to the demand for the product, and if the entire volume is not sold, a company might sustain an overall budgetary loss on the product. # Absorption Pricing: Method of pricing in which all costs are recovered. The price of the product includes the variable cost of each item plus a proportionate amount of the fixed costs. A form of cost plus pricing # High-Low Pricing: Method of pricing for an organization where the goods or services offered by the organization are regularly priced higher than competitors, but through promotions, advertisements, and or coupons, lower prices are offered on key items. The lower promotional prices are targeted to bring customers to the organization where the customer is offered the promotional product as well as the regular higher priced products. # Premium Decoy Pricing: Method of pricing where an organization artificially sets one product price high, in order to boost sales of a lower priced product. # Marginal Cost Pricing: In business, the practice of setting the price of a product to equal the extra cost of producing an extra unit of output. By this policy, a producer charges, for each product unit sold, only the addition to total cost resulting from materials and direct labor. Businesses often set prices close to marginal cost during periods of poor sales. If, for example, an item has a marginal cost of $1.00 and a normal selling price is $2.00, the firm selling the item might wish to lower the price to $1.10 if demand has waned. The business would choose this approach because the incremental profit of 10 cents from the transaction is better than no sale at all. # Value Based Pricing: Pricing a product based on the perceived value and not on any other factor. Pricing based on the demand for a specific product would have a likely change in the market place. # Fermium Pricing: Fermium is a business model that works by offering a product or service free of charge (typically digital offerings such as software, content, games, web services or

other) while charging a premium for advanced features, functionality, or related products and services. The word "fermium" is a portmanteau combining the two aspects of the business model: "free" and "premium". It has become a highly popular model, with notable success. # Odd Pricing: In this type of pricing, the seller tend to fix a price whose latest digits are odd numbers. This is done so as to give the buyers/consumers no gap for bargaining as the prices seem to be less and yet in actual sense are too high. A good example of this can be noticed in telephone promotions of some countries like Uganda where instead of writing the price as sh. 40000, they write it as sh. 39999. This pricing policy is common in economies using the free market policy.

IPHONE Prices Charge: The iPhone 3G is available from four authorized retailers: Apple, AT&T, Best Buy, and Walmart. All of them, except Walmart, charge the same price for the various iPhone models. (Walmart's prices are $2 cheaper.) All of these prices require that you sign a new two-year service contract with AT&T; existing AT&T customers who are eligible for an upgrade will get these prices, too. 8GB iPhone 3G (Black): $199 16GB iPhone 3G (Black): $299 16GB iPhone 3G (White): $299 AT&T subscribers who are not yet eligible for a handset upgrade will be charged the following prices: 8GB iPhone 3G (Black): $399 16GB iPhone 3G (Black): $499 16GB iPhone 3G (White): $499 All existing AT&T customers will be charged an upgrade fee of $18, whether or not they are eligible for the discounted prices.

To get the iPhone 4 for the lowest price, you must sign up for a two-year service contract with AT&T or Verizon. New AT&T customers will get these subsidized prices, as will existing AT&T customers who are eligible for an upgrade. (AT&T is offering early upgrades to some existing customers; this articlecan help you find out how to check your upgrade eligibility.) Verizon Wireless is offering the same subsidized prices to new subscribers and those eligible for upgrades. Existing customers who are eligible for upgrades can get these prices through the carrier's "New Every Two" program. Those who are not eligible for upgrades will need to pay full price, but may be able to take advantage of Verizon's Trade-In Program. 16GB iPhone 4 (Black or White): $199 32GB iPhone 4 (Black or White): $299 AT&T subscribers who are not yet eligible for a handset upgrade will be charged the following "Early Upgrader" prices. (These prices also require a two-year service commitment.) 16GB iPhone 4 (Black or White): $399 32GB iPhone 4 (Black or White): $499 If you don't want to sign a service contract with AT&T, you'll pay more for the iPhone 4. The No Commitment prices are: 16GB iPhone 4 (Black or White): $599 32GB iPhone 4 (Black or White): $699 Verizon customers who are not eligible for an upgrade will have to pay full retail price for the iPhone 4. These prices are: 16GB iPhone 4 (Black or White): $649 32GB iPhone 4 (Black or White): $749

All existing AT&T customers will be charged an upgrade fee of $18, whether or not they are eligible for the discounted prices. Verizon Wireless is not charging an activation fee for new customers.

# How to accommodate changes and promote progress:

Products accommodate changes and promotion is the act of advertising a good or service with the short/long term goal of increasing sales. Many companies use different techniques to promote their products through a vast array of communication mediums. In this day and age, there is not necessarily one communication medium that is better than another simply because the most affective medium is based on what type of product you are promoting. There is the physical form of product promotion and the digital form, both of which require clear and concise textual information about the product being advertised. Since the turn of the 21st century, many companies have been trying to utilize online social media for product promotion. Some of the most popular forms of online social media are Facebook,Twitter, and MySpace. Within an online social media network, companies have the ability to advertise and promote their products to anyone, at anytime, anywhere in the world. Because of the vast popularity of social media, companies have had great success on marketing products to the younger generation who otherwise might not have seen an ad in a newspaper or on TV. Product promotion is a very complex process. Prior to doing any promotion, you have to know your product, your competitors, and your target market. Knowing these will enable you to determine the most appropriate marketing plan. I suggest that you pick up a book on the subject to get you started. You may also consider hiring a consultant to create a marketing plan for you. I think its also important that as well as showing that your product is up to standard with the competition, you make it very obvious and exciting what is different about your product. IPHONE Accommodate changes: 1. Markets are dynamic what is efficient today may not be efficient tomorrow as tastes, technology, and resource supplies change. Prices help signal those changes.

2. An increase in demand for some products will lead to higher prices in 3. Increased demand leads to higher prices that induce greater quantities of output 4. Higher prices lead to more profits and new firms entering the market; lower 5. The guiding function of prices is essential to a well-functioning market system. In the absence of such signals, government or some similar institution would have to decide where resources are allocated, but without knowing what people in society want. IPHONE Promote progress: 1. The market system promotes technological improvements and capital accumulation. 2. An entrepreneur or firm that introduces a popular new product will be rewarded with increased revenue and profits. 3. New technologies that reduce production costs, and thus product price, will spread throughout the industry as a result of competition. 4. Creative destruction occurs when new products and production methods destroy the market positions of firms that are not able or willing to adjust.

#Conclusion:
Profit maximization is the process of identifying the most efficient manner of obtaining the highest rate of return from its production model. There are several different approaches to this pursuit of the highest profit margin that may be used by any corporation or business. Most approaches require that the company look closely at the costs of production, the current levels of supply and demand, and the price that can be obtained for each unit while still attracting the highest volume of consumers. IPHONE profit maximization also looks at factors outside the actual production process. For example, the focus may be on finding new ways to advertise and promote the product line, especially if those approaches are likely to generate more revenue and cost less to maintain. While the manufacturing facility may already be operating at full capacity, the right marketing campaign can make it possible to move more products and thus increase the bottom line of the business. This in turn helps to increase the profits that are ultimately realized by the company. By using the right advertising strategies and selling the goods at prices that consumers are willing to pay, the goal of profit maximization efforts is reached, and the business can enjoy total revenue that is at the highest level possible.