This essay discusses the impacts smartphone technology, on micro and on macroeconomic approaches.
In Microeconomics, it will shed the lights on demand and supply models, market structure, and to discusses spillovers to other markets.
On the other hand, macroeconomics lay emphasis on the study of the national economy as a whole. It will be discussed how industry globally affected by emerged structure (ecosystem), impacts on social, employment and contribution to the public funding.
Despite the technology can generate harmful and inconvenient results to corporations that couldn’t adapt their visions of market modernity, but without controversy, technology became and remain the transformation key in the majority of contemporary and traditional industries toward positive performance, quality, demand growth and pension reduction. Below table Illustrate the average unit price and quantity demanded of smartphones in the total world in years 2014 and 2015.Therefore, the average percentage change in prices can be calculated using (307.52 – 310.86) / 310.86 x 100= -1.07%.And the percentage change in quantity Demanded = (1300-1220) / 1220 x 100 = 6.28%Hence, the price elasticity of demand (PED) = 6.28% / -1.07% = -5.87Therefore Demand for the smartphones can be considered as elastic because the PED value is greater than absolute value 1. Demand curve in figure (2) is based on Ceteris paribus, in other words, prices and quantities are variables, where other factors held constant (Pearson, 2015). (Please refer to appendices of elasticity).According to IJSTR (2016) analysis, smartphones most important factors can effect on consumer decision in the below table:Moreover, There are six main factors bring changes in consumer demand (M. Parkin, 2011), assuming consumer income and price of smartphone as described below: 1- Consumer’s income: When income increased, it will cause budget to shift right toward normal 1goods, while income decreased, it will cause the budget shift to the left or toward inferior 2goods, which will cause it to lower indifference curve.Figure (3) shows different reactions, each start with an identical income, reacts to the higher income by mainly increasing consumption at X, Z original choice at W, Y.1- Price of the smartphone: Most of the consumers in this industry has a price “conscious” character (Leo Bannett, and Hartel, 2005). That concluded, the increase in the price of related good increases demand if products are substitutes, decreases demand if products are complements (Pearson, 2015).It defined as “the total amount of goods available for purchase at any specified price” (Business dictionary, 2017), and it is illustrated by curve and schedule (M. Parkin, 2011). As stated by Dr. Trzeciakiewicz (2017), that “there is no well-defined supply curve for imperfect competition “.Increase in supply occurs (shift from S1 to S3), when firms tend to increase the quantity of a product they want to sell at a given price, while decreases in supply (shift from S1 to S2) when firms decrease the quantity of a product they want to sell at a given price. Figure (6) ,the price of smartphones rises from 200$ to 250$, supply curve will be moved up from point A to point B an increase in quantity supplied by firms from 10 million to 11 million. For any other changes factors, entire supply curve will change as stated in figure (5).The smartphone industry is one of the most dynamic and rapid markets, with vast leaps since its inception. Moreover, continuous improvements in the price, performance, and added value features frontier of smartphones accelerated the shift toward purchases of smartphones by consumers (ISTR, 2016). The smartphone market is considered as an oligopoly or imperfect market structure (ISTR,2016).Where large firms face strong competition from small firms (Trzeciakiewicz,2017) ,and products are differentiated to benefit some consumers (OECD,1999), also involves only a few sellers of a standardized or differentiated product, (McConnell, et al 2012).The Figure (8) present the market equilibrium at point E, where the demand by consumer (D) intersect with supply (S), then prices have no tendency to change. In smartphone market as described above, the both curves intersects at a price of 200 $ with a quantity of 10 million per certain period at point (E).in other words, the quantity demanded is equal to the quantity supplied.Moreover, market price would be above equilibrium at 250$, smartphones surplus occur to be 2 million (quantity supplied ? quantity demanded), the firms reacts to cut the price to dispose of the surplus, then price will go back to the equilibrium point. Also, market price would be below equilibrium at 100$ a shortage occur of 4 million (quantity supplied ? quantity demanded). The firms reacts toward price increases to the equilibrium pointIf assuming as figure (10), a firm enters the market, such as Amazon (Associated press, 2014), the equilibrium price will decrease, as well as equilibrium quantity will increase. Thus the supply curve shifts to the right, to S2, resulting a surplus of smartphones at price P1.If assuming in figure (11) increases in consumer income occur, will increase the equilibrium point, because smartphones is considered normal good, resulting the quantity demanded increases at each price. Hence, the market demand curve shifts right, from D1 to D2, and will causes a shortage of quantity at the price of P1.Therfore the equilibrium price increase from P1 to P2, and equilibrium quantity increase from Q1 to Q2.Moreover if supply shifting more than demand the quantity increase, and equilibrium price will decrease. Taking into consideration, the size of the changes need to be known, else the effect on equilibrium price is enigmatic.Recently, from 2007 smartphones vendors are competing to present more capabilities on built -in cameras with remarkable improvements, resulted to increase of smartphones productions, and decrease the digital camera market productions.A shift of the supply curve leads to an increase in quantity demanded. This is a movement along the demand curve and new equilibrium value, while figures (12) shows the significant decrease in the number of digital cameras.Figure (13) shows the effect of supply shift and changes in equilibrium point (camera and imaging products association “CIPA”). The smartphones industry became a major competitor for digital cameras due to extensive improvement in built-in cameras, along with adopting into recognized IT industry, (IEMC, 2004).
1 Normal goods: highest quality performance with higher selling prices smartphones such as Apple I phones, Samsung Galaxy note.
2 Inferior goods: Usually are non-well-known brands, with near similar features to normal goods, and cheaper.