Found this one in my Text book and need some help, could you please answer me th

Question

Found this one in my Text book and need some help,

could you please answer me those questions in detail.

Case 1:

Fitbit is one recent marketing success story, selling more than 10 million units to health-conscious individuals who want to track their exercise routines. Apple then announces that it will sell an Apple Watch that tracks body activity and much more with 10 different sensors. Some Apple Watch models will sell for over $1 thousand. When the Apple Watch came out some people camped out at Apple stores to be the first in line to purchase them.

Case 2:

Tesla "leaks" information concerning a new all electric model they will sell for much less than the existing models. Before the car is was ready for market they had already taken sizable deposits from people willing to commit to a purchase of the car sight unseen.

Are the markets for Apple Watch and Tesla cars elastic or inelastic?

What is the impact on Apple and Tesla?

What is the impact on individuals who purchase the product?

What is the impact on an economy that is fueled approximately 70% by consumption?

Thank you.

Explanation / Answer

1.
Market for Apple Watch is inelastic in nature and it is exhibited by the quality conscious customers, flocking outside the Apple store and ready to pay the price of more than $1000. It is the value based pricing followed by Apple to price its smart watch.
The market for Tesla is elastic in nature and it is exhibited by Tesla to launch lower price models and subsequent enthusiasm among the consumers depositing the funds to buy these low price models.  

2.
Apple has to make value based pricing and offer best quality to the consumers to remain ahead of the competition. So, Apple has to cater the focused or niche segment. While Tesla has to be price competitive to attract higher size of the target audience. So, Tesla has to achieve the cost leadership in its electric car segment.

3.
People buying the Apple watch will help them to build a status symbol as it is perceived to drive high value. It is the symbol of quality and it has come to them at a cost. Consumers of tesla car get the value for money as it is a lower price version of the electric car and people now can cope up with the rising oil prices. It also helps people to use the alternative source of energy to drive their car without depending upon the traditional fuel.
4.
It will increase the demand, and output produced by the economy will increase. Here, the marginal propensity to consume is .7 or 70%. It means that the spending multiplier is 1/(1- . 7) = 3.33. It means that additional spending of $1 in the economy upon these products , will increase the total output or GDP by $3.33.

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