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The Smartest Cookies: Your Smartphones or You?

· 范文参考

Word count: 1464

Introduction

Deloitte (2018) stated that the percentage of smartphone user have increased from 50% to 87% from 2012 to 2017, and Apple and Samsung are the two biggest smartphone manufactures in aspect of their market occupation and the technologies they have. It is evident that smartphones have integrated into our lives and companies who produce them are also working for better functions of smartphones. However, some studies have found that smartphone usage is linked to heart diseases and stroke. In this project, we will start from a discussion about how such information could impact on the smartphone market by using the supply and demand theory. Secondly, we will analyze the PED (Price elasticity of demand) with some given figures and hence give a discussion about what does this PED value suggest. Thirdly, as some reports suggested that current smartphone functions have already satisfied users’ need hence users are no longer expecting more advanced technologies. Also, some decrease in smartphone sales have been observed: Apple’s sales dropped in 2017 for the first time, average time for smartphone upgrade grew from 23.5 to 25.3 months (Fowler, 2018). In this part, we will discuss this point of view and how this phenomenon could affect the market. Last but not least, we will discuss how Fowler (2018)’s view reconciles with Glaser (2018)’s.

Discussion

Qa What is the impact when demand falls and supply remains constant?

Although a great number of people are expected to be willing to pay any price for the latest Apple smartphones, and those who are encouraged or nudged by others are also very likely to have this behavior, this phenomenon may be changed once the information that these smartphones are risky for human’s heath. For instance, there is evidence suggesting that using smartphones may have led to some mental problems, such as depression (Hunt el al., 2018), and sleeping with a smartphone next to you is also very likely to harm human’s wellbeing (Huges and Burke, 2018). According the statistical report by Benjamin (2019), the percentage of people who are suffering from various heart diseases and stoke have increased in recent years, this is probably linked to the greater usage of smartphone. As personal health and safety are the most important things that people would concern, the market demand of smartphones is likely to drop when people can feel the threat from using them. From the question, we know that the market supply will not vary in short-term, but on the other hand, the market demand will decrease.

When there is a decrease in demand and supply remains constant, the demand curve is anticipated to shift leftward. Decrease in demand will lead to excess supply at the old equilibrium level. This would further trigger a more competitive relationship among sellers, and this will cause the price to fall.

In addition, since price falls, an increasing number of consumers will begin to demand the products or services. This price decrease will lead to a drop in supply while demand is expected to increase correspondingly. This mechanism continues unless a new equilibrium condition is achieved. Effectively, a decrease in both equilibrium price and quantity is expected to be observed.

Qb What is the value of PED in this case and what does it suggest?

Change in pricing = -11%

Change in demand = Change in sales = +50%

Coefficient of PED = 4.55

As PED is greater than 1, the demand responds more than proportionately to a change in price, thus, we can say that the demand is elastic. In this case, the price elasticity of demand for this price change is 4.55.

If the coefficient of price elasticity of demand is greater than 1, then demand is said to be price elastic, we could say that the demand is highly responsive to a change in price.

When we say a demand is price elastic, a supplier is expected s to obtain additional revenue when their price is reduced. In addition, the variation in quantity demanded will be proportionately higher than the reduction in price. This is shown in the diagram below.

Qc Smartphones have reached peak in terms of usefulness?

As stated by Fowler (2018), many smartphone users are enjoying the functions provided by smartphone technologies and not looking forward to a further development and improvement of those technologies since they found current ones enough. For example, cameras have been improved a lot during the last decade, but ordinary people might not be able to tell much difference between pictures took by different cameras if they do not look very close. An increasing number of Americans do not find it necessary to upgrade their smartphones every year. In 2015, Americans upgrade their phones to the latest one in 23.5 months, on average. However, this figure grew to 25.3 months by the end of 2017. What now consumers are looking forward to is an extended battery life. Many consumers are willing to replace their current devices by a new one with longer battery life and those big leading smartphone producers are working on this. Hence, people are now tired with upgrading their smartphones to the latest one, their need is no longer a better camera or anything that cannot make a great benefit to their lives, but they may desire some other functions, such as an extend battery life. Thus, those leading smartphone manufactures will develop those new functions aligned with consumers’ demand, once those technology becomes mature, they will capture consumers’ eyes.

Qd How does Fowler (2018)’s view reconciles with Glaser (2018)’s?

Fowler (2018) stated that the increase in the market for smartphone upgrades is decreasing and the “super cycle” of upgrades is no long super. Also, Apple reported its first-time decline in sales last year. Fowler demonstrated that people are no longer looking forward to upgrading their smartphones, but companies will develop new technologies to attract or get consumers nudged to make purchase of more advanced ones. This reconciles with Glaser (2018), which stated that both Apple and Samsung are about to launch new models that sell for 1,000 dollars for each device, and they are confident that this price increase will not become a barrier for sales. The new phones are probably worth the price. According to Neil Cybart, an analyst at Apple, believes this is not simply a price increase, this is actually a reflection of the new technology coming with the device. Unlike other electronics, such as mp3 players, whose main function can be fully covered by smartphones, tend to decrease in price, smartphones seem to be able to stand for higher price tags. In addition, although those two new models are fairly expensive, Apple will also keep the low-cost options, IPhone SE, this secures the budgeting customers, and the new model will target at and nudge consumers who have enough budget. Last but not least, even if Apple or Samsung failed on this experiment, they have the ability to stand this failure or they can keep the price high and one day when customers find they do not have other options they will purchase anyway.

Conclusion

When there is a decrease in demand and supply remains constant, the demand curve is anticipated to shift leftward. Decrease in demand will lead to excess supply at the old equilibrium level. This would further trigger a more competitive relationship among sellers, and this will cause the price to fall. In addition, since price falls, an increasing number of consumers will begin to demand the products or services. This price decrease will lead to a drop in supply while demand is expected to increase correspondingly. This mechanism continues unless a new equilibrium condition is achieved. Effectively, a decrease in both equilibrium price and quantity is expected to be observed.

When we say a demand is price elastic, a supplier is expected s to obtain additional revenue when their price is reduced. In addition, the variation in quantity demanded will be proportionately higher than the reduction in price.

Although some reports suggested that current smartphone functions have already satisfied users’ need hence users are no longer expecting more advanced technologies, this may imply a decrease market demand, those smartphone producers will work to develop new or more advance technologies which are desired by consumers and make them willing to pay for these.

Both Apple and Samsung are planning to launch new models that sell for 1,000 dollars for each device, and they are confident that this price increase will not become a barrier for sales. Also, Apple will keep the low-priced model, iPhone SE, on the market, target at the budgeting customers. Also, even if Apple or Samsung failed on this experiment they can afford the outcomes.

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