How the iPhona Changed Modern Economics - Essay Example

 Economics Assignment Since the inception of the realisation that man has needs and wants which need to be fulfilled as per his capa to do thesame, economic problems arose in the world. The world has shifted into a very industrialized and globalised form over the years and this has paved the way for a complex situation which includes the concepts of demand and supply. Demand refers to the quantity of a commodity that an individual desires to have and the supply is the ability of the producer to be able to provide that particular quantity and commodity to the individual who requires it. The economic problem of scarcity refers to the problem of choice that most people have because their purchasing power is limited, or the ability to purchase products is limited despite them having a high demand for the commodities they wish to purchase, however at the same time, they have scarce options to choose from in order to make the best choices with their given purchasing power or wealth bundles. The entire process includes a transaction and involves the exchange of goods and services for money. This paper helps to discuss and provide an insight into how demand and supply has changed the world in the present modern era with the help of electronics, in specific, the iPhone. This phone has become a phenomenon in the world today, however a news article talks about how the demand outstrips the supply in China for this particular commodity and how that has affected the people at a micro economic level in the country. China Unicom Ltd. Said that it was not being able to meet the demand for iPhones in China with an equal level of supply because of the excess in quantity that has been demanded by the people there. The iPhone is no longer a good that falls under the category of luxury goods because this very fact that its demand is growing day by day, shows that the people are easily able to afford the same and want to purchase it at the price that it has launched at. According to the company, an estimated 200,000 iPhones were pre ordered the very day that the phone went on sale in the country and another 400,000 were sold on that day. The company was able to attract so many buyers because of the popularity that the phone had gained over the Chinese market because of the sale of its previous model, which had further excited a wider consumer base. Even though the phones are more expensive, they offer better features as well as data services which have attracted such a wide consumer base. In economic terms, it is clear and evident that this particular phone has appealed a great deal to at least half of the Chinese market because more and more people have bought it at the price at which it was launched. The iPad was also released in China and went on sale at a fast pace as well. However, the crux of the matter remained that the iPhone’s demand exceeded the supply that the company was able to give to the people. This goes to show that there was an extension of demand in the particular commodity at the same or even higher price. Since the iPhone 4 was costlier than the previous version, an extension (and not just an increase) in demand can be noticed here in economic terms which means that there is movement along the demand curve where the sale and purchase of iPhones in China are concerned. As per the article, “As of the second quarter, Apple was the fifth-largest smart phone vendor in China with 7.1% of shipments, according to Beijing research firm Analysys International. Nokia Corp. had the largest share with 26.7%.” this very statement helps in understanding the kind of consumer base that Apple has created for itself in China; and that even in deep cut throat competition, the company has been able to sustain its position in the Chinese market, which can be seen when the demand for the phones exceeded the supply level. In a nutshell, the concepts of supply and demand can be viewed with the help of understanding the economic model of price determination in a market. In order to understand the same, one must understand that in a competitive market, the unit price for a particular good keeps varying till it settles at a point where the quantity of the commodity that is demanded by consumers (at current price) will equal out to the quantity of the very commodity which is supplied by producers (at current price). This further results in an economic equilibrium of price and quantity. Thus, according to the basis laws of demand and supply, if the demand of a product or commodity increases but the supply remains unchanged, then it leads to a higher equilibrium price and quantity. In order to understand the above written concept of market equilibrium, “a situation in a market when the price is such that the quantity that consumers wish to demand is correctly balanced by the quantity that firms wish to supply,” the example of the demand and supply of iPhones in China can be taken and read. Basically, market equilibrium is a situation that is achieved when the demand and supply of a commodity in the market meet at a point on the curve when depicted on a graph. However, in this situation, the demand is more than the supply and so the equilibrium is higher in nature and must come down to a point where the supply is provided at an equal level. If this fails to happen, then the customers will be dissatisfied with the low level of supply because they are at a point where they want to buy the commodity even at a higher price. Thus, when the consumers are prepared but the market for supplying is not, then the demand will ultimately go down if it is not met with because it will lead to great dissatisfaction among the consumer base. Thus, the company must be able to make certain decision with respect to providing the level of demand that is required in order to meet a level of market equilibrium with the sale of the iPhones. There are various factors that affect the demand and supply of a product. One of the main is the change in nature and taste of the consumers as well as the population that a given region has. China is undoubtedly one of the most populated countries in the world and thus, the demand for the iPhone was extremely high because of the same reason. The company did not anticipate such a high demand and thus was not prepared with the supply of the given number of phones within the country. However, this should help the country understand that the market for the particular phone in China is extremely high and thus they should be prepared with a higher supply amount the next time. Estimation of supply levels should have been made on the basis of pre orders that were made by the customers. All these factors help to analyse the population situation in the country and helps the company to also ascertain its profit level with respect to the kind of demand that is wanted by the people for the particular product. In the previous year, when the previous version of the iPhone was released, the demand was not as high, which probably helped the company to rethink their decision with the level of supply to be ready with. Thus, the supply should have been met, or decisions should have been taken after looking at the level of demand required by the population of the country in order to not leave the consumers dissatisfied or leave the use of the product. Also, the company should understand that the Chinese market is a very vast one with a large number of substitutes and thus if Apple does not want to lose out on its consumer base then it should have taken immediate steps to provide the supply for the product so that the substitutes in the market do not begin to establish themselves. As per the article, “Apple is looking to increase product sales and promote its brand by opening more of its retail stores in China. It opened two stores over the weekend, doubling its total in the country, as part of plans to add a total of 25 by the end of next year.” In conclusion, the article is a very interesting article based on the supply and demand of iPhones in China where the supply was outstripped by the demand in the country because of various factors like an extension in the demand for the particular commodity. This has been explained fairly clearly within the scope of this paper. Furthermore, it has been explained as to how the demand and supply cause a level of market equilibrium which is the point where the demand and supply in the market at a given price are equal to each other. However, in this case, it is not and thus arises the problem. References Fletcher, O. (2010, September 26). Apple iPhone 4 Outstrips Supply in China. Wall Street Journal, Retrieved from http://online.wsj.com/article/SB10001424052748704760704575515534170591458.html Read More