When will iPad sales rebound? And will Mac sales fall when they do? Source: Apple.

Apple (NASDAQ:AAPL) just reported a blowout quarter, surpassing analysts' expectations on revenue and profit. But the earnings report wasn't all rosy. Notably, iPad sales fell for the third straight quarter and missed expectations. The 12.3 million iPads sold last quarter represent a 13% decline in iPad sales year over year and severely missed analysts' consensus estimate of 13.1 million.

Meanwhile, Mac sales have been surging, with last quarter representing the best quarter of sales in the company's history. There certainly seems to be a relationship between the Mac and the iPad. As iPad sales have fallen this year, Mac sales have increased. Last year, when iPad sales were still growing, Mac sales were decreasing. What exactly is going on here?

The simple conclusion
The simple conclusion is that the iPad and Mac are substitutes for one another. Not perfect substitutes, mind you, but a lot of people looking to buy a new computer will opt for an iPad over a Mac because it can do everything they need for a lower price. For others, a tablet just won't cut it, and they need the computing power of a full-fledged notebook or desktop.

The thing about substitute goods is that when the selling price of one of the substitutes decreases, its sales will increase. As a result, the other substitute's sales decrease.

Indeed, in recent quarters Apple has seen a small rebound in the average selling price of iPads while the ASP for Macs has declined slightly. Before the drop in iPad sales, we saw its ASP decline in 2013 after the release of the iPad Mini, resulting in a sales increase while Mac sales declined.

These weren't huge price swings, though. Not like the decline in ASP for the iPad after Apple introduced the lower-priced iPad Mini. It's just a little price fluctuation between 1% and 4%. It doesn't completely explain the huge swing in iPad and Mac sales.

A different substitute
As I mentioned, iPads and Macs are substitutes for one another, but not perfect substitutes. Likewise, large-screen smartphones and iPads are substitute goods -- even better substitutes than iPads and Macs.

Over the past couple of years, we've seen huge increase in the number of large-screen phones available. Apple finally started feeling the pressure from competitors to make a larger iPhone and released the iPhone 6 Plus this year. But the competition wasn't cutting into iPhone sales as much as it was cutting into iPad Mini sales.

Remember, the ASP for iPads started to increase again this year, implying fewer sales of the iPad Mini in the mix. That's because consumers were opting to substitute their small-screen tablet purchases with a large-screen phone. This makes economic sense, as the cost of owning a giant phone is much lower than the cost of owning a phone and a small tablet.

A large-screen phone is a much worse substitute for a Mac than an iPad. As a result, Mac sales are starting to rebound as more people buy PCs to complement their large phones and we continue to see a shift to Mac from Windows.

A final explanation
One last explanation for the falling iPad sales is that the number of people who haven't bought a tablet yet is shrinking. While the market might not be saturated -- as CEO Tim Cook claims -- the number of new purchasers is starting to decrease. Meanwhile, we've yet to see a major replacement cycle kick in and grow sales.

On the fourth-quarter conference call, Cook said the number of first-time iPad buyers in its top six markets accounted for 50% to 70% of purchases. In the previous quarter, Cook said that number was "more than 50%." In the first half of the year, over two-thirds of iPad purchasers were new to the iPad.

Thus, we can estimate that the number of purchasers new to iPad has decreased year over year in each of the past three quarters, while the number of purchasers upgrading has increased in each of the past three quarters. It might not be long before replacement purchases start to grow past new purchases, and iPad sales settle in for steady growth, a la the iPhone.

Meanwhile, as iPad owners put off purchasing a new iPad, they might be opting to round out their computing portfolio with a Mac, which Apple has made some great advancements with in terms of interoperability with the iPad and iPhone.

Putting falling iPad sales in context
I can't be sure that any of these explanations is accurate, but my point is that if you put Apple's falling iPad sales into the context of its total product portfolio as it stands today, it doesn't look very bad at all. It seems like Mac and iPad are on different replacement cycles or -- worst-case scenario -- users are opting for a Mac over an iPad to complement their large phones. Apple would rather sell customers a Mac than an iPad, though, as the former carries a higher average selling price and results in more profits.

Over the past two quarters, iPad revenue combined with Mac revenue has been relatively stable compared with the same period in 2013. Meanwhile, the new iPhone 6 Plus helped Apple increase its iPhone ASP by $42 sequentially last quarter with just a few days of sales. Additionally, Apple is making efforts to compel users to own all three types of devices. Only time will tell if iPad and Mac sales can continue to grow at the same time.

Adam Levy owns shares of Apple. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.