The Changes in the Cost of Mobile Phone - Essay Example

THE CHANGES IN THE COST OF MOBILE PHONE By School Location Mobile phones are becoming an indispensable part of the lives of many human beings. These phones have become very useful components in the lives of many people since they have enabled the opening up of areas that were previously unreachable. Mobile phones are presently being used for much more than just calling and sending text messages. Mobile phones are useful for sending emails, social media communication, getting the time, getting direction (from google maps), entertainment (music, radio, photos and videos) and as shown by what is happening in the developing world like in Kenya they can be used to transfer funds. This means that the usage of mobile phones is contributing to the growth of economies. As observed the average real incomes of economies such as Britain and the United states appear to far exceed those of developing nations like Kenya and Bangladesh (Romer, 2012). The contribution of mobile phones to countries like Kenya and Bangladesh is immense. In this regard, because Mobile phones have become very useful commodities in the market place and in the development and growth of human capital, their availability or easy accessibility is something that decision makers in many parts of the world should be pondering on. To begin with, a discussion on the impact of mobile telephony on the GDPs of the emerging markets. As mentioned earlier, mobile phones have enabled the emerging economies to access markets at different levels. Presently buying and selling of goods can be done by mobile communication.(Apart from the Mpesa option that is very much in use within east Africa, IPhone recently launched its mobile application for mobile transactions.) This in turn increases the channels available for sellers to sell their goods and for buyers to make their purchases. As observed by some economists most of the world economic growth is being experienced in the emerging markets (Doepke,1999). The emerging markets still have very many areas which have not been fully exploited. There isan increase in thenumber of people getting to the middle class level who are able to and would like to spend. With reduction in the prices of mobile phones this enables the individuals to spend more of their money on the mobile phone products and this in turn would lead to more revenue generated by the phone companies and the government. Also mobile phones have been able to be used to transfer funds to different areas or players in the economy. To add to this there have been very many ingenious inventions which have can be attributed to the availability of Mobile phones. With these activities then end result is usually the availability of more employment options for individuals in the economy. This is through the people who manage the transfers of the applications which have been invented by the advent of the mobile phones, more specifically smart phones. There are businesses which would start due to mobile phones. With more people employed in an economy the end result may be an increase in per capita income within the country concerned. A more likely scenario is an improvement in the living standards of the people in that country (Introduction to Macroeconomics, n.d). This results in the community investing more and more in education, entertainment and health. As living standards increase the population will start to care more about esthetics (Schmitt-Groheet..al, 2014). This would ultimately lead to more care on the environment as investments will be made to try and improve the environment. In addition to this, with the reduction in prices which is counter to the rate of inflation in most countries the result is usually an increase in the ability of consumers to spend. This in turn would lead to more sales of products available in the market. With more sales then the small businesses and large ones are able to keep a float and continue to contribute to the economy. This also contributes to a reduction in unemployment. Furthermore, there reduction in the prices of the phones may have a positive result of allowing individuals who are purchasing the phones to be able to have some balance after purchasing which they would be able to decide to save or invest on the balance (Kunst, 2006). With more people saving and investing the result is that banks and Investment firms would be able to invest more in the country providing many other stakeholders an opportunity earn and also invest as well. In this explanation the income, nationalsavings and investment options are explained.Let Qtdenote the amount of final goods and services produced domestically in period t. This measure of output is typically referred to as gross domestic product, or GDP. Let Ct denote the amount of goods and services consumed domestically by the private sector in period t, Gt denote government consumption in period t, and It denote the amount of goods and services used for domestic investment (in plants, infrastructure, etc.) in period t. Ct, Gt, and It will simply be referred to as consumption, government spending, and investment in period t, respectively. Qt + IMt = Ct + It + Gt + X This familiar identity, states that the aggregate supply of goods, given by the sum of GDP and imports, can be used in four ways, private consumption, investment, public consumption, or exports. Using the fact that the T Bt =Xt − IMt and rearranging, we obtainT Bt = Qt − Ct − It – Gt(Schmitt-Grohe, 2014). Plugging this relation into equation yields CAt = rBt−1+ Qt − Ct − It − Gt The sum of GDP and net investment income (rBt−1), is called nationalincome, or gross national product (GNP). The national income will be denoted in period t by Yt, that is,Yt = Qt + rBt−1 Combining the last two expressions results in the following representation of the current account CAt = Yt − Ct − It − Gt National savings, which we will denote by St , is defined as the difference between national income and the sum of private and government consumption, that is, St = Yt − Ct – Gt International Macroeconomics, It then follows from equation that the current account is equal to savings minus investment, CAt = St − It According to this relation, a deficit in the current account occurs when a country’s investment exceeds its savings. On the other hand, a current account excessis obtained when a country’s investment falls short of its savings.The current account is in deficit when domestic absorption of goods and services exceeds national income. A country’s absorption is defined as the sum of private consumption, government consumption, and investment (Schmitt-Grohe, 2014). A reduction in the price of mobile phones would also lead to an increase in the consumption of the mobile phones. With this the result may be that more goods being sold. As a consequence this could in turn affect the exchange rates. With the exporting country the effect may be that the currency of the country may become stronger. The opposite may also be true. A stronger currency may result in the country having more expensive goods in the world market (Kunst, 2006). This could result in less goods being sold in the market. On the other hand a reduced currency would lead to cheaper goods to and in the long run more sales of their commodities. This can end up improving the emerging economy. As observed, there are many intricacies that affect the reduction of mobile phone prices. With issues of gross domestic product, gross national product, growth and inflation affected by the reduction in mobile phone prices, the reduction of the mobile phone prices could lead to a reduction in employment, increase in spending but also lead to increased investment and savings which all are very helpful in improving the economy and helping emerging markets to grow. References Doepke. M., A. Lehnert, A. W. Sellgren 1999: Macroeconomics, University of Chicago Fern´andez-Villaverde.J .Macroeconomics: an Introduction Horwitz S:2003. Microfoundations and Macroeconomics. An Austrian perspective. Kunst M. R. 2006. Introduction to Macroeconomics, Lecture Notes Romer. D 2012. Advanced Macroeconomics4th ed. University of California, Berkeley Schmitt-Groh´e, M. Uribe 2014: International Macroeconomics, Columbia University Read More