Question

An account of the difficulties of Japanese mobile phone manufacturers argues that these firms made a mistake by concentrating on selling in high-income countries while
making little effort to sell in low-income countries:

The main growth in the wireless industry overall is in emerging markets, which need cheap
phones. The world’s top three makers—Nokia, Samsung and Motorola—focus on this segment.
. . . Japanese firms are caught in a vicious circle: because they are not selling to poor countries,
their volume stays low, which keeps prices high, which makes selling to poor countries infeasible.

Why would the price of Japanese mobile phones be high because Japanese firms are producing these phones in low volumes? Use a graph to illustrate your answer.

Answer 1