et equilibrium is the position at which the demand becomes equal to the supply and this helps in analysing the price which needed to be charged, and such price is known as an equilibrium price. The equilibrium price is the point where demand and supply interact with each other. The price is believed to be constant until an external force affects the demand and supply of the goods, and such can result in the shift in the curve (Schneider, 2013). Therefore, the demand and supply data shows that the demand and supply are becoming equal at 50m units when the price is charged at £30 from the customers. The market equilibrium price for SmartWatch is £30, and the equilibrium quantity is 50m units annually.

B.Supply and Demand Schedule

(Fig. 2)

The increase in the price at £40 would affect the demand in an inverse way which means that that the demand will decrease with an increasing price. The price plays a major role in the demand of a product, and the law of demand states that an increase in prices will decrease the demand when other things are kept constant (Arnold, 2008). After evaluating the above figure, it has been evaluated that the price of £40 will result in the demand decrease at 30m units annually.

(Fig. 3)

The price and supply have a direct relationship which states that an increase in the price will result in increased supply. The law of supply states that the supply will be affected only by the price, and the other elements are kept constant and the increase in price will increase the demand (Arnold, 2008). Therefore, it can be stated that an increase in price at £40 will result in an increase in demand, and this can be evaluated from the graph above which shows that when the price becomes £40, the supply becomes 70m units per year.

Income Effect

Normal goods are the goods, whose demand shows a direct relationship with the income as such goods are the goods that the customers demand when the income increases, and the affordability also increases. The goods whose demand falls when the income of the individual decreases, and the demand increases when th