Supply and Demand of Cell Phones

Supply and Demand of Cell Phones

Introduction:

        In todays world everyone is fascinated with the bigger better flashiest cell phone.  People use cellphones as a way to escape the outside world and draw themselves in.  The newer and flashier the cellphone the more important you seem to be.  The question people need to ask their self is how much and I willing to spend on a cell phone?  The companies need to keep up with the supply and demand for the components to make the cell phone and not to over price them too much.

Demand:  Price

        As cell phones have become more sophisticated and the need for them is greater in every day life, the price of the smart phone will go up.  The average price for a cell phone today is around $363 in the global market.  As you can see in the graph below since the increase of smart phone is needed the price has also increased just within the last 2-3 years (Why people are buying, January 2018).

 Figure 1. Graph of Year-over-year change in global average smartphone. From https://www.recode.net/2018/1/23/16923832/global-smartphone-prices-grew-faster-iphone-quarter

The cost of cellphones is supposed start at around $1000 this year because consumers are willing to pay the price for a quality phone.  This would be a 10.3% price increase from 2017.  With the cost of cell phone makers developing the product, putting better hardware, and manufacturing costs will help increase the cost of the phone (Smartphone prices starting, Aug.2018).  While the first quarter of 2018 sales for smart phones dropped by only 2%, cell phone makers were able to still real in an amazing $129.8 billion dollars in revenue which is an 18% increase from 2017 first quarter.  This goes to show that the increase in demand for cell phones is greater than ever (Global smartphone sales were, April 2018).

As of right now people are waiting on average to upgrade their cell phone between 20 months and 24 months depending on cell phone.  When new phones are put onto the market the suppliers never have enough during the first shipment.  Normally phones such as the iPhone come up short.  When new phones are released the normal trend shows that the phone take 3-6 weeks to get to the consumer.  This is different if the mobile device has been out for a bit, that shipment averages around 1-2 weeks (The Future of the Smartphone Market, 2017).   Cell phone companies plan for these short falls because in some instances they do not have enough of the hardware all at once to make up for the rest of the orders.  As the phone stays out longer the more supply of hardware they receive or have in stock.  This in turn raises the demand for their product.

Cell Phone Owners

        Cell phones are no longer analog they are now digital.  They aren't just used to call people while on the road, they are used to reach out into the world.  We can exchange photos with people, gain access to the internet, track children and others.  From the year 2002, which is only 16 years ago the number of people grew from 62% to around 95%.  Of course, so did the number of people using smart phones as shown in the graph below in figure 2.0. 

 Figure 2.0 information from graph taken from Mobile Fact Sheet. (2018, February 05)

Below is a graph of cell phone owners by percentage.  It shows that the younger generations, the ones that grew up with cell phones have a greater need for cell phones.  As the age group goes higher the percentage of smart phones decreases.

 Figure 2.1. Information from graph taken from Mobile Fact Sheet. (2018, February 05)

As the need to keep in contact with people so has the need for people to get cell phone. Also, the need for educated people to have smart phones to stay in contact has also increased.  People are in need to communicate with others on a regular basis.  According to Jay Donovan of techcrunch.com (2016) the average age for a child to receive their first cell phone is 10.3 years of age.  Parents are become lax on their children gaining access to the internet.  Children are not just getting hand-me down phones now they are actually receiving their own accounts with data included.  The days of handing your child the phone you upgraded from has gone away and now children as young as 6 or 7 are handed cell phones worth on average of $363 (The average age for a child, 2016).

Cost of Cell Phone Service

        According to the Department of Labor and Statistics, money used on cell phone service has grown by 58.5% since 2007.  This poll was taken in 2014 which only stands to reason that the actual money consumers use is more like 65-70%.  The average American spent $608 in 2007 yearly.  Below is a graph showing the increase in spending.  As you can see more and more people are using mobile devices to communicate rather then having residential service in their house. 

As you can see from the chart the average spending on mobile phones has increased by leaps and bounds over the last 8 years.  People are decreasing the amount they spend on their residential phones and making themselves accessible to the world where ever they go.

Conclusion:

As the world keeps evolving into a technological world people will continue to buy cell phones.  The need to be accessible to friends, family and even your job is instrumental.  The demand for these types of products will continue to grow for the foreseeable future.  When children are being introduced at such a young age it is hard to deny the truth, and the truth is that we continue to want more from the cell phone companies and there for the demand for this technology is great.  Until a chip is implanted into our head as seen in the movie Click, we will need some way to be in contact with people.  The human race has moved from being enthralled with what was happening in our small corner to being thrust into having access to the world in the palm of our hand. 

References

1. Bugeja, M. (2004, 11). Cellphones and real-world communication. The Education Digest, 70, 36-39. Retrieved from https://search.proquest.com.ezproxy.libproxy.db.erau.edu/docview/218188379?accountid=27203
2. Diaconescu, A. (2018, April 26). Global smartphone sales were down in Q1 2018. Retrieved September 10, 2018, from https://pocketnow.com/global-smartphone-sales-q1-2018-average-prices
3. Donovan, J. (2016, May 19). The average age for a child getting their first smartphone is now 10.3 years. Retrieved September 14, 2018, from https://techcrunch.com/2016/05/19/the-average-age-for-a-child-getting-their-first-smartphone-is-now-10-3-years/
4. Meek, A. (2018, August 07). Smartphone prices starting at $1,000 are getting more common, and it's all your fault. Retrieved September 09, 2018, from https://bgr.com/2018/08/07/smartphone-prices-keep-rising-thanks-to-1000-iphone-x/
5. Mobile Fact Sheet. (2018, February 05). Retrieved September 10, 2018, from https://www.pewinternet.org/fact-sheet/mobile/
6. Molla, R. (2018, January 24). Why people are buying more expensive smartphones than they have in years. Retrieved September 09, 2018, from https://www.recode.net/2018/1/23/16923832/global-smartphone-prices-grew-faster-iphone-quarter
7. The Future of the Smartphone Market. (2017, September 29). Retrieved September 14, 2018, from https://emberify.com/blog/the-future-of-apples-new-iphone-the-smartphone-market/

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