How Apple got us to pay so much for the iPhone

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The iPhone is getting more expensive, and Apple is betting faithful customers will barely blink an eye.

Apple has slowly increased the average price of an iPhone since 2007, but with the $999 iPhone X release last year, it made a bigger leap than usual. A year later, after the shock value of a thousand dollar smartphone had largely worn off, Apple made another jump.

On Wednesday, the company announced its most expensive iPhone ever, the iPhone XS Max, which starts at $1,099 and can cost up to $1,449 for the model with the most memory.

Component prices may have lowered in the past year, according to analysts, but Apple’s new pricing doesn’t reflect that. It does reflect Apple’s strategy for making money off of iPhones while sales are plateauing around the world.

But first, Apple had to make sure its customers would go for the new costs. Last year’s iPhone X was one test, but Apple kept the main iPhone 8 options priced similarly, and stayed conscious of the lower-end market by dropping the price of its older devices like the iPhone SE.

“Apple has been intentionally testing the price elasticity of its products in the past few years, and what it found is customers have an appetite for more expensive iPhones,” said Wayne Lam, an analyst at IHS Markit.

The iPhone XS, which replaces the similar iPhone X, keeps the $999 price tag but is now in the middle of the new X-branded line, not on top. For people on a budget (well, an iPhone kind of budget), the cheaper iPhone XR adopts some of the iPhone X’s design and interface features, with a different screen and no dual camera on the back. The XR model can be seen as taking the iPhone 8’s place in Apple’s line up, with a $50 price bump. It will continue to sell the iPhone 7, starting at $449, and 8, starting at $599.

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