How did Apple address consumers' diminishing marginal utility for iPads in order to maintain sales and consumer surplus?

• A. By introducing new features and regular product updates to increase perceived value
• B. By limiting the availability of iPads to create artificial scarcity
• C. By significantly lowering the price of all iPad models each year
• D. By bundling iPads with unrelated products to force purchases

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of diminishing marginal utility, which means that as a consumer consumes more units of a product, the additional satisfaction (utility) gained from each extra unit tends to decrease.
2. Step 2: Recognize that to maintain sales and consumer surplus despite diminishing marginal utility, a firm must find ways to increase the perceived value of the product so that consumers continue to find it worthwhile to purchase.
3. Step 3: Analyze the options given: lowering prices significantly each year could reduce revenue and may not sustain perceived value; limiting availability to create scarcity affects supply but not utility directly; bundling with unrelated products may not increase the core product's utility.
4. Step 4: Identify that introducing new features and regular product updates effectively increases the product's utility by enhancing its capabilities and appeal, thus counteracting diminishing marginal utility.
5. Step 5: Conclude that by continuously innovating and updating the iPad, Apple maintains consumer interest and perceived value, which helps sustain sales and consumer surplus over time.