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Essay example - The number of owners of mobile phones has grown rapidly and hence the demand for mobile phones has also grown rapidly. Yet the prices of mobile phones have fallen. Why? Explain using relevant diagrams.

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Pages 6 (1506 words)
An increase in demand for a product results when buyers have the will and the ability to purchase a good or a service at the stated price. This…

Extract of sample

However, in the mobile phone market, the demand for mobile phones increases as the price of the mobile phones decreases. This can be attributed to various reasons.
Begg et al. (2011) notes that, for there to be an increase in demand, there have to be a change in one or more of the demand determinants. An increase in demand will in turn cause a shift to the right of the demand curve. When there is a shift to the right of the demand curve, the markets equilibrium will be disrupted thus causing a temporary shortage of the product being demanded. The temporary shortage created is eliminated with an increase in price of the product. However, in the mobile phone industry, there has been an increase in demand and a decrease in their prices. This can be attributed to various factors (Research and Markets 2011).
Sloman & Garratt (2010) posits that an increase in demand of mobile phones can be caused by an increase in buyers’ income. When the level of income of the buyer increase, the buyer gets more money to spend on a certain commodity, which they are interested in. this happens when there is an increase in the income for a normal good. Moreover, an increase in demand for mobile phones can be attributed to a decrease in income of the buyer for an inferior good.
Moreover, an increase buyer’s preference on mobile phones against other communication gadgets has caused a shift in the demand curve for mobile phones. Mobile phones are preferred since they are easier to use and results to instant feedback as compared to earlier means of communication such as letters. Moreover, mobile phones are preferred since they are cheap to afford as well as offers flexible means of communication (Mobile Promotions Market 2012). Mobile phones have gained consumer confidence in that the advanced systems allow the user to make audio-visual calls.
Furthermore, mobile phone industry has experienced a boom in sales due to inflexibility of its competitors. For ...
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