On this day in 2007, the Apple iPhone officially went on sale to the public. The phone was sold for $499 and had a hard drive size of four gigabytes for the smaller model, and $599 for the larger eight gigabytes model. Lineups that rounded blocks and campers taking up city sidewalks outside of retail stores were a common sight on launch day. Now, two years later, the upgraded eight gigabyte version of the iPhone costs $99.

This is a perfect example of two flaws in the consumer price index (CPI). The CPI allows us to gauge the cost of living and inflation from one year to the next. New products, such as smart phones, increase consumer welfare, which puts a upward bias on the CPI known as new product bias. Also, the huge increase in quality over two years, as is seen in most new technologies, skews the numbers and is known as the quality change bias. (Learn more in Economic Indicators: Consumer Price Index (CPI).)

Apple's (Nasdaq:AAPL) stock is up about 60% since the announcement of the iPhone back on January 9, 2007. Keep in mind, this is after the largest market crash since the Great Depression. Sales for the newest version of the iPhone (3G) exceeded one million units in the first three days after its launch, so it still looks like Apple is providing what consumers want. Some estimates even have the total iPhones sold to date at well over 20 million.

IN PICTURES:
Eight Ways To Survive A Market Downturn

Related Articles
  1. Investing

    3 Healthy Financial Habits for 2016

    ”Winning” investors don't just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets.
  2. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  3. Economics

    The Truth about Productivity

    Why has labor market productivity slowed sharply around the world in recent years? One of the greatest economic mysteries out there.
  4. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  5. Investing News

    Is It Time To Sell Technology Stocks? (LNKD, AAPL)

    Technology stocks have taken a drubbing in recent days. Is it time to sell them?
  6. Stock Analysis

    Drone Wars: DJI Vs. Intel (INTC)

    Find out which drone technology leaders, Intel Corporation or DJI Innovations, is most likely to emerge victorious in the coming drone wars.
  7. Stock Analysis

    4 Best Drone Stocks to Invest in for 2016 (AMBA, ESLT)

    Find out which companies' stocks are set to lead the growth of the potential $100 billion industry of drone makers in 2016 and beyond.
  8. Investing

    Does BlackBerry Have What It Takes To Succeed? (BBRY)

    The last several years have been tough for BlackBerry shareholders. With the company in the midst of an attempted turnaround, we examine their progress.
  9. Investing

    Adobe Systems: A Company In Transition (ADBE)

    Adobe Systems is undergoing a major change to its business model. We take a look at its strategy, challenges, and performance.
  10. Stock Analysis

    Are U.S. Stocks Still the Place To Be in 2016?

    Understand why U.S. stocks are absolutely the place to be in 2016, even though the year has gotten off to an awful start for the market.
RELATED FAQS
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  2. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  3. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  4. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reduce the number of times shoppers and buyers have to pay for goods ... Read Full Answer >>
  5. Does QVC accept debit cards?

    QVC accepts debit card payments as one of its many payment options. The company, which is the world’s leading video and e-commerce ... Read Full Answer >>
  6. Does QVC charge sales tax?

    QVC, an American TV network, is registered with states to collect sales or use tax on taxable items. QVC is also required ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center