Bonanza Offer FLAT 20% off & $20 sign up bonus Order Now
Demand and supply principles are the most basic part of economics that stands as a crucial component defining the markets for various products in the economy. Mobile phones in today’s world is a commodity or product that is highly demanded by consumers considering the increasing use of the product because of the formation of new mobile companies, numerous suppliers providing phones at affordable prices which attracts consumers from all kinds of income classes who can easily afford a mobile phone of the price range they can want to buy. We shall analyze the mobile phone market here, to see the demand supply trends of mobile phones and the factors that affect the demand supply of mobile phones.
As was noted by the ‘The Guardian’ as of the year 2009, more than half of the world population had mobile phone accounts which must have increased further after the growth of suppliers and units of the product in the market. The sale of mobile phones in the nations which are poorer rose considerably in the years from 2006 to 2010 (MegaEssays). As per the GSM association the mobile phones industry revenues were expected to go up to $1.9 trillion in 2015 as the number of mobile connections pitch to 9.1 billion (Bingemann, 2012).
Australia is said to have 9th highest number of smart phone subscriptions in the world. It is found that 89% of Australians own a smart phone, 34% do not have a landline connection, 61% would prefer a mobile phone than a TV (Rogers, 2015). Further technological developments with the Apple i-Phone launch in 2007 and i-Pad in 2010, as well as the Samsung android phones have boosted the demand for smart phones and tablets. The industry revenue is predicted to grow at a compound annual rate of 9.3% in the coming five years along with the industry’s contribution towards the economy is predicted to go up at the annual rate of 5.1% over a period of 10 years. The push given by Australian carriers to wireless data services and mobile hardware is also considered as a reason for the industry boom, with wide coverage the rising demand for data services is increasing demand for smart phones. Surveys and statistics also claim that Australia is considered as the top smart phone market, as per the data saying that the smart phone penetration has risen up to 84% in 2013 from just 19% in 2007. On the other side social media has driven more people towards mobiles through fast networking via applications as the Yellow Pages Report says 59% of the Australian social media users are accessing Facebook on mobile devices (Business Insider, 2013).
If we consider the pricing strategies of mobile phones, then prices are fixed on differentiation of devices and the price point segments giving rise to different equilibrium prices based on demand and supply of different types of mobile phones. Pricing is also dependent on the competitor’s prices. Demand of the mobile phones differs as per geographical regions, distribution chain, local taxes, etc. If we consider the differentiation between the devices and revenue obtained from those then we see that marginal revenue from a smart-phone which is considered of the higher segment is greater than a phone from the lower end. The market structure of mobile phones is unusual, as in there is no perfect completion but there is no oligopoly either even though the market is driven mostly by a fewer number of big players in the industry. If we consider demand for mobile phones then it also depends on the preference pattern of consumers based on brands (Saharan, 2013).
As we know there are several factors that affect the demand and supply of a product. Similarly, here there are many other such factors that affect the demand supply of mobile phones. The factors cause a shift in the demand curve of mobile phones, shifting upward or downwards and simultaneously increasing or decreasing prices (Pindyck et al., 2009). Some of the factors that affect the demand for mobile phones are:
The price point of each particular type of phone
Prices of substitute goods like tablets, laptops, PDAs, etc.
Prices of complementary goods which are often bought along with the mobile phones, like accessories, phone covers, USB cables, headphones, etc.
Expenditure on advertising and marketing is very crucial in determining demand ,the more advertising the greater will be the demand
Disposable income of the customer, the higher the income the greater would be the purchasing power of the customer to buy a mobile phone and of higher price point
Macroeconomic factors like inflation, economic growth, IT booms, recession also affects the demand for mobile phones
Tastes and preferences of consumers. This can affect in multiple ways, consumers who do not prefer the use of mobile phones or are restricted till a certain age shall have lower demand whereas it also affects the individual demands for types of mobile phones based on phones of higher segments like smart phones or of the lower end.
Availability and cost of credit for customers also affect their demand or purchase of mobile phones. Higher costs may not make consumers be more attracted to buying phones.
Expectations of consumers, of fall in prices of phones in future or better models to enter the market in future also affects the demand for the devices
Population changes also affect the demand. Rise in population shall increase the demand depending the growth in population is in which income level and vice versa.
Relationship with telecom partners, distribution channels or operators also affects the demand for mobile phones.
Production Costs affect the number of mobile phones supplied in the market. If the prices of related inputs in producing the mobile phone increases then the supply of mobile phones in the market decreases and vice versa.
Technology also plays a significant part in determining production costs and hence the supply of the phones in the market. If the technological knowledge of how to combine different inputs like labor, raw materials or machinery goes up, then the production becomes much more efficient and hence increases the supply of mobile phones in the market.
Prices of the other goods that the mobile company can produce or sell also affects the supply of the mobile phones by the company and is also included in the cost of production as some sort of opportunity cost.
The mobile company also takes into consideration the consumer expectations or the changes in consumer behavior which can result in changes of demand and hence supply of the phones.
There is huge competition in the mobile phones market between various sellers coming up with new innovations and differentiations in products which also affect the individual company supply in the market.
Market size also affects the market supply as the growth of the market in future also affects the quantity to be supplied in future. (Varian, 2010)
Over the next following years the mobile phone price is expected to fall because of the growing competition and the increased supply of mobile phones by many producers (Fig 2), which will soon lead the market to reach a point of saturation such that the demand would grown at a slower rate. The prices would fall essentially because of the growing markets in developing economies like China and India (Pettinger, 2012).
Thus, we saw how the sale of mobile phones is increasing globally and soon would reach its saturation point where billions of users would own mobile phones and hence demand would be growing slowly. The growing demand and supply is also benefitting industries related to the mobile phone industry like the telecommunications industry or the ones which sell accessories that act as complementary goods for mobile phone. Growth in sale of mobile phones is also in a way boosting economic growth with its considerable contribution to the GDP of economies and helping citizens be more connected to the world through internet or mobile applications.
Pindyck, R, Rubinfeld, D & Mehta, P 2009, Microeconomics, Pearson, South Asia
Varian, H 2010, Intermediate microeconomics, Affiliated East-West Press, New Delhi
Mankiw, G 2007, Economics: principles and applications, Cengage learning, New Delhi
Xaxx, J,2012, Factors Affecting the Market Demand & Supply for Mobile Phones, viewed 21 August 2016, http://www.ehow.com/list_6689902_factors-demand-supply-mobile-phones.html
UKEssays, 2015, Factors that influence the demand for mobile phones, viewed 22 August 2016, https://www.ukessays.com/essays/economics/factors-that-influence-the-demand-for-mobile-phones-economics-essay.php
Saharan, P, 2013, Demand Supply analysis (Nokia), viewed 22 August 2016, http://www.slideshare.net/hooda_27/demandsupplyanalysis-nokia
MegaEssays, Evaluation of Supply and Demand of consumers use of mobile telephony, viewed 22 August 2016, https://www.megaessays.com/viewpaper/201845.html
Business Insider, 2013, Explaining the mobile Industry’s boom in Australia, viewed 22 August 2016, http://www.businessinsider.in/Explaining-The-Mobile-Industrys-Boom-In-Australia/articleshow/23029967.cms
Rogers, E, 2015, 28 Impressive facts about the Australian mobile market, viewed 22 August 2016, http://blog.snakkmedia.com/28-impressive-facts-about-the-australian-mobile-market/
Bingemann, M, 2012, The Australian, The mobile phone industry is growing at an incredible pace and not slowing down, viewed 22 August 2016, http://www.theaustralian.com.au/business/technology/the-mobile-phone-industry-is-growing-at-an-incredible-pace-and-is-not-slowing-down/story-e6frgakx-1226289763230
Pettinger, T, 2012, Falling price of mobile phones, viewed 22 August 2016, http://www.economicshelp.org/blog/6279/economics/falling-price-of-mobile-phones/
MyAssignmenthelp.co.uk provides homework help from K-12 and beyond. Our homework writing services cover a vast range of subjects and can help students with their essays, projects, book reports and more. We have more than 3000 highly qualified homework writing helpers on our team to make sure students get only the best.
Upload your Assignment and improve Your Grade
Boost Grades