Question

During the last years, the price of the components used to produce smartphones has fallen and consumer incomes have risen. Prices of smartphones (assume that this is a normal good) have fallen in recent years. Explains the falling prices of smartphones. Indicate what would happen to the quantity

Answer 1

Falling Prices of Smartphones

• The Mobile phone market is a good example of how to explain some basic concepts of supply and demand. for example, it shows how improved technology and increased supply- can reduce price, even as demand rises.
• the good news for users is that over the next five or ten years, the price of mobile phones is forecast to fall.
• This is primarily due to the increased competition and increased supply from major producers.
• As the market reach saturation point, demand will increase at a slower rate.
• Studies indicate that a key factor in reducing prices will be the growth of markets in developing economies, India and China.
• Typically, these economies have smaller disposable income, so there will be greater pressure for manufacturers to price competitively.
• Combined with improvements in technology, and greater competition, prices could fall up to 70%