Question

At the beginning, the cellular service companies offered data service to the mobiles of their clients and it was billed per kilobyte. At present, many customers pay a monthly fee that allows blocks of data measured in gigabytes (millions of kilobytes) or unlimited data. In large part this is due to technological advances in the transmission of data and the increase in complexity and volume of data trafficked on the internet. Has the cost of data increased or decreased? Explain

Answer 1

The cost of providing data has decreased considerably. Previously, we have to buy data for a limited amount and pay for every KB usage. But now, as the technological advancement occurs and companies were allowed to achieve the economies of scale in the market.

These changes shifted the supply curve for the firms to the right and the new equilibrium is at a lower price and higher output. As more and more smart phone penetration occur and everybody needs some data firms providing them these data can achieve even more economies of scale and provide even cheaper data in the market.