Expected effect on market price and quantity in the market for mobile phone handsets of each of the following circumstancesWhen consumer income rises and more of them want to buy mobile phone handsets, then the demand for the mobile phone handsets increases. The income effect comes into play here as when individual purchasing power increases because of their rising income. A good in question will hence be bought more if it is required quality. Inferior quality mobile phones are not considered for this analysis. The assumption made here is that the mobile phone is of good quality or normal quality. .Usually in economic analysis, a good will is considered as normal good, inferior good or complementary well which is interdependent on consumption. Here the mobile phone is a normal good.Assuming that the mobile phone handset in question is one that is desirable and one that people want to buy, it could be said that an increase in income will have a positive correlation on the demand curve. The demand curve is shifted to the right. The price of the phone increases because of the demand in the market and the quantity of phones in the market will increase as a response to demand. Alternatively, a shift to the left is observed in the case of increased income when the phone in question is not a desirable good. Product manufacturing costs, operational costs in manufacturing, product distribution and delivery costs are some of the costs that are tied up in the determination of the end costs for products. The technical support available for a product will be helpful in driving down the manufacturing costs, operational costs etc. This in turn will help the company to drive down their cost per handset to customer.
Thus when the technical improvements reduce production costs, then the overall cost per handset could be brought down. This means that the price declines. For a normal good, when the good is desirable in the market and when the price goes down for it, consumers will tend to buy it. The customers are expected to be knowledgeable about the good they buy in a market economy (Dongling, 1999). The very competitive nature of the market economy is structured around this. Therefore when the price for a product declines, then the demand for the product would increase as customers will want to buy it. The quantity demanded will hence raise leading to a sloping demand curve. Quantity demanded at different price levels can be seen in the above diagram. The lower the price is, the higher the demands and vice versa. However, there are any exceptions to the case here. A mobile phone handset has a certain life time and consumers would probably not want to buy another handset of the same model if they already have an existing handset. Secondly, the mobile phone market is a very competitive one, and consumers have a different variety of choices to choose from. Technology support for mobile goods increases in a rather balanced way for all mobile phone manufacturers, so cost control is not just dependent on technology but other factors such as geography etc.