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Supply and Demand of the Market for Mobile Phones

Updated November 19, 2021
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Supply and Demand of the Market for Mobile Phones essay

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A market is a place where buyers and sellers meet and, the sale and purchase of goods and services take place. It is astounding to know that the demand for mobile phones in Canada was not much famous until the ’90s; they came into existence in mass-market after the release of Apple iPhone in 2007. According to CBC news, there were five significant moments when cell phones were taken to a new platform by updating devices with upcoming technology and services.

Concerning their reports, the Motorola engineer Martin Cooper was the first to make a phone call in 1973 through a mobile phone, and he is also knowns as the inventor of the Cell phone. Within a decade, the U.S. Federal Communications Commission approved Motorola’s DynaTAC phone for the use of consumers. After the invention of the first commercial cellphone for public use, Bellsouth and IBM created Simon, the personal communicator phone in 1993. In the early 21st century, the first in-built Camera phones were made available for consumers such as Nokia 7650 and the Sanyo SPC-5300.

In 2003, Blackberry unveiled its’ first integrated phone. After four years, the iPhone was officially launched into the market with its’ first device having three characteristics in one handheld device – a mobile phone, an iPod, and a wireless communication device. In 2009, Samsung manufactured Samsung GT-I7500 Galaxy that uses the Android Operating System. In today’s telecommunication market, Samsung is the best selling product among the mobile phone market.

Determinants of Demand or Demand Shifters

Several factors are responsible for bringing change in the demand curve. Some people say that the demand curve shifts with the difference in price; however, it is not only the price that drives these changes. The independent variables that are important determinants of demand curve are consumer preferences, prices of related goods and services, consumer income, and demographic trends such as population size and buyer expectations, which also plays a vital role in fluctuations of the demand curve.

For instance, the number of people will buy Apple iPhone, or Samsung Cellphone depends on their preferences and tastes, whether they like Apple iPhone or Samsung. Some people want to buy the iOs Operating system, while others also have a different choice – Android Operating System or Windows system.

Also, the shifts in the demand curve can be noticed when the prices of alternative goods and services rise or falls. Suppose the consumers have more demand for Samsung; the costs of Apple iPhone as a substitute will increase, leading to a change in the demand curve towards right.

The demand for mobile phone service also depends on consumer income. If consumers have higher income, it is evident that they are highly willing to pay for better goods and services, which drives the curve towards the right, meaning more demand for that product or service. The opposite can be observed when consumer income is low, and they are least eager to pay.

Another demand shifter responsible for bringing change in the curve is the population size and buyers’ expectations. If the number of people in the market will be more means more demand for the product. The product quality and features are also responsible for bringing up changes in the demand curve. If the product has reached the buyers’ expectations in terms of quality and features, more people will be demanding that particular product. Thus, it will shift the demand curve towards right.

Determinants of Supply or Supply Shifters

The changes in the supply curve can be brought up by bringing modifications in the Factor costs and by increasing or decreasing taxes or subsidies. There are also other factors taken into consideration responsible for bringing changes in the supply side of supply and demand curve – producer expectations, number of producers in the market, weather conditions, and the implementation of technology.

Factor Costs

These are the costs associated with the production of the goods. Goods require the availability of workers to produce products, lower wages, lower raw material costs, and the costs used to pay bills for the firm. The availability of the above factors of production is needed to meet the requirements of more production by an industry. Thus, if there will be more production of goods, the supply of products would be higher than estimated.

Lower costs associated with the production mean more profit for the firm, which means massive production that shifts the supply curve right. Higher the factor costs mean less production and fewer benefits for the organization that moves the supply curve towards left.

For example, the latest Apple devices and Samsung Galaxy smartphones have more features installed in them, which demands more time, labor costs, and costs for raw materials to assemble them. Thus, these devices sometimes have a shortage in the market.

Taxes or Subsidies

Taxes make it expensive for producers to make products, whereas subsidies make it cheaper to do business. Lowering the direct taxes reduces the cost of goods, which increases the production and drives the motivation of producers. Thus, the supply curve shifts right. On the other hand, higher taxes make the costs of raw materials for producers unaffordable, decreasing the production and moving the supply curve towards left. Increasing government subsidies will also reduce the costs of goods, e.g., subsidizing raw materials will reduce the price of mobile phones.

The government is responsible for the stabilization of the economy through regulation, taxation, and subsidies. The government uses fiscal stimulus and Monetary stimulus to bring back the economy onto the path of growth. Some people have an abundance of resources available to survive, while others lack these resources. To balance these inequities, the government uses regulation, taxation, and subsidies methods to intervene in the market. Fiscal policy is the best stimulus to bring the economy back onto the path. The main objective of the Fiscal policy is to generate healthy economic growth by increasing government spending and reducing taxes in economic shock.

Impact of Price Ceilings

In other forms, the price ceiling is done to control the prices of the product so that it is achievable by everyone in the market. The price ceiling takes place when the government puts a legal limit on how high the product could be in price. The price ceiling is considered to be useful when the government decides to set it below the natural market equilibrium price. When the price ceiling is set up, there is a shortage of quantity supplied as compared to its’ amount demanded. (Essays, U.K., November 2018)

Government’s Economic Objective

The government intervenes in the mobile phone service market to maintain the stability of the economy, maintain law and order, minimize inequality, regulate labor markets, and protect the environment. (Pettinger, T., 2020) The government’s primary function is to provide mobile phone service to every person around the world. They want to diminish the difference between rich and poor. The government tries to correct market failure. To adjust for market failure, To achieve a more equitable distribution of income and wealth, To improve the performance of the economy. The government may intervene in the market by using price control, tax, and subsidy. At the same time, the government will cause market distortion.

Another factor that can be taken into account is the government is helping people in providing funds to them. This will increase the chances of spending more on electronic devices, which increases the income level of the young population. Also, if consumers will spend more on these devices and services, the government will receive more taxes from consumers, which means increasing funds in government hands.

The impact on the market using supply and demand curves

Government policies can impact the cost of the production and supply curve through taxes, regulations, reduce the cost of production, and increase supply at every given price, shifting sourcing to the right. The supply curve production is willing to increase output at higher rates to increase profits regulation, price ceiling to protect consumers of absolute good or service by establishing a maximum price, a government wants to ensure the product is affordable for as many consumers as possible. (Essays, U.K., November 2018)

Impact of Taxation on Economic Output

The effect of a particular tax is either on the producer or the consumer, depending on the price elasticity of supply and demand. When the amount remains constant, and the market changes with the change in price, the producer is affected by the taxes; however, when the demand remains constant and the supply changes with the difference in price, the consumer is concerned.

References

  1. CBC News – Technology & Science, (April 3, 2013). “5 major moments in Cellphone history”. Accessed on June 16, 2020. Retrieved from: https://www.cbc.ca/news/technology/5-major-moments-in-cellphone-history-1.1407352
  2. Pettinger, T., (November,2012). “Line Graph: Supply and Demand curve for falling mobile phone prices.” Accessed on June 17, 2020. Source: Www.economicshelp.org / World Bank Retrieved from: https://www.economicshelp.org/blog/6279/economics/falling-price-of-mobile-phones/
  3. Pettinger, T., (November,2019). “Line Graph: Supply Curve shifts left.” Accessed on June 17, 2020. Source: Www.economicshelp.org / World Bank Retrieved from: https://www.economicshelp.org/microessays/equilibrium/supply/
  4. Pettinger, T., (November,2019), “Line Graph: Supply Curve Shifts Right.” Accessed on June 15, 2020. Source: Www.economicshelp.org / World Bank Retrieved from: https://www.economicshelp.org/microessays/equilibrium/supply/
  5. Pettinger, T. (April 12, 2020). “Should the Government intervene the economy?” Accessed on June 18, 2020. Retrieved from: https://www.economicshelp.org/blog/5735/economics/should-the-government-intervene-in-the-economy/ “Blog Post – Government Intervention and Disequilibrium.” Accessed on June 19, 2020.
  6. Essays, U.K. (November,2018). “The Main Reasons for Government Intervention Economics Essay.” Retrieved from: https://www.ukessays.com/essays/economics/the-main-reasons-for-government-intervention-economics-essay.php?vref=1
  7. “Line Graph: Impact of Taxation on economic output.” Accessed on June 19, 2020. Source: www.analystforum.com Retrieved from: https://ec3010.files.wordpress.com/2011/11/as-markets-price-elasticity-of-demand_clip_image005.gif
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