iPhone+Demand+Outstrips+Supply+In+China+by+Daryl

= TITLE OF EXTRACT: = =Title of Extract: IPhone Demand Outstrips Supply in China= = SOURCE: = http://www.gwn.com/articles/article.php/id/850/title/PlayStation_3_Supply_Surpasses_Demand.html

= DATE EXTRACT WAS WRITTEN: = September 26 2010

= DATE CURRENT EVENT WAS WRITTEN: = February 23 2012

= EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE: = This article basically talks about how Unicom is having a hard time bring the supply of the new iphone 4 to the excessive demand. This article deals with 2 economic terms, demand and supply. As shown in diagram two, with the introduction of the iphone 4 in China, the demand increased, creating an excess demand, meaning that more demand than supply. In order to catch up with the demand, Apple company is adding retail stores in China so that the customers who are willing to purchase the new iphone can be satisfied. Partly, this article indirectly talks about how the new iphone have a rather inelastic demand due to the new technology – 3G – introduced. As shown in diagram three, even though the price becomes more expensive because of this new feature, the quantity demanded would only decrease a little because of the inelastic demand.

= VOCABULARY TERMS AND DEFINITIONS: = > Demand: The willingness and ability of consumers to purchase a quantity of a good or service at all prices in all time periods. > Excess demand: Disparity between the amount demanded for a product or service and the amount supplied in a market, when the demand is higher than the supply. > Inelastic Demand: a situation in which the demand for a service or good does not increase or decrease correspondingly with a fall or rise in its price. > Quantity Demanded: The amount of good or service that consumers are willing and able to buy at a given price. > Market: An actual or nominal place where forces of demand and supply operate, and where buyers and sellers interact (directly or through intermediaries) to trade goods and services for money.
 * Supply: The willingness and ability of producers to produce a quantity of a good or service at all prices in all time periods.

= DIAGRAMS: =





= **EVALUATION:** =

Right now, the situation stated in the article is that there is an excess demand, meaning there is a shortage in supply. Because there is a shortage in supply, the market for iphone4 is not at its equilibrium point. In order for the market to meet its new equilibrium point, the market can try to do 2 things: increase supply or decrease demand. The market can try to decrease demand by raising the price. If they raise the price, then the new equilibrium point would be met. However, rather than doing this, I think the best way to fix the market’s problem is to try to increase supply. In the article, it is already stated that the Apple Company is increasing the number of firms available to supply iphone4. This is a way of increasing supply by increasing the number of producers. Government subsidy is another way to increase supply, but this would be unlikely in this case because it is not a “need” but a “want”. Another way the market can increase supply is by introducing a better technology to the market. This way, the new technology make the production process faster and more effective, as a result increasing the supply so that the market will be at equilibrium again as shown in diagram 1.