Microeconomics: Supply And Demand For The Iphone Economy

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1. Demand and supply are the strengths that make market economies work. Microeconomics in the world today is mostly about supply, demand and market equilibrium. Customers determine demand and sellers determine supply. ‘Demand refers to how much (quantity) of a product or service is desired by buyers’ (Investopedia.com, no date). The quantity demanded is the measure of an item individuals are willing to purchase at a sure value; the relationship between price and quantity demanded is known as the law of Demand i.e. ceteris paribus when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises. ‘Supply speaks to how much the business sector can offer’ (Investopedia.com, no date). …show more content…
If there is an increase in consumers demanding the new IPhone 6s and IPhone 6 but a decrease in consumers demanding the IPhone 5 then demand for the IPhone market will still shift right because the customers who previously wanted the 5s may now want the newer version. However, people may decide that they no longer wish to own IPhones but would rather have Samsung phones if they are lead to believe that Samsung’s are better than IPhones, for example if I have been using IPhones since they were introduced and made popular and there is an advertisement stating that the new Samsung can do a lot more than my IPhone can do and is generally better then I am likely to change from apple to Samsung. Other factors also affect demand such as income, related goods, tastes and number of buyers, this shows that not only an increase in consumers can shift demand to the right. If incomes fall which means people have less disposable income then they are likely to start looking for a cheaper product of a similar kind so instead of buying an IPhone they may decide to but a Nokia or an LG phone, and if the prices of related goods such as a Nokia which is a cheaper substitute smartphone fall significantly then even if the number of people in the market is continuously increasing, as a result of all the other falling factors, demand might remain unchanged or could possibly even fall. However, this is unlikely because IPhones are nowadays seen as a must have product no matter how much it is and is also seen as a necessity suggesting that it is price inelastic, therefore an increase in the price of the product in relation to other products will not cause a large

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