Apple's share of Chinese smartphone market+declines+by+I+Hyun

Apple's share of Chinese smartphone market declines
 * TITLE OF EXTRACT:**

China Daily http://www.chinadaily.com.cn/bizchina/2012-02/18/content_14638791.htm
 * SOURCE:**

February 18 2012
 * DATE EXTRACT WAS WRITTEN:**

February 232012
 * DATE CURRENT EVENT WAS WRITTEN:**

Apple Inc.’s product iPhones are experiencing a fall in demand because of the price and other determinants of demand. The law of demand states that as the price increases, the quantity demanded decreases. Although the price of iPhones hasn’t exactly risen, this law explains why high priced products aren’t bought and sold in big quantities. Another explanation of the fall in demand is two of the determinants of demand, income and the price of other products. For income, iPhones are considered normal goods; the higher people’s incomes are, the higher the demand for the product will be. However, right now, iPhones are more than two months salary for the average Chinese smartphone user, which goes back to the point about how the demand for iPhones are low. Additionally, as iPhones are a part of an oligopoly of smartphones, there are many substitutes available such as Samsung Electronics Co Ltd, Nokia Oyj, and domestic companies Huawei Technologies Co Ltd and ZTE Corp. These firms provide a competition for Apple and especially since their smarphone prices are considerably lower than those of Apple, people would choose to buy cheaper brands than Apple.
 * EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:**


 * VOCABULARY TERMS AND DEFINITIONS:**
 * Demand – quantity of a good or service that consumers are willing and able to purchase at all prices at a given time period
 * Oligopoly – a type of market structure where a few firms dominate an industry
 * Market – where buyers and sellers come together to carry out an economic transaction
 * Inelastic demand – change in the price of product leads to a proportionally smaller change in the quantity demanded of it

Law of Demand
 * DIAGRAMS:**

Supply and demand curve for iPhones

Inleastic demand

Apple Inc’s share of China’s smartphone market is decreasing because of the price. There are several ways to fix this problem of low demand. The first possible way is to decrease the price. Therefore, according to the Law of Demand, the demand would increase. Another way is to increase the supply and therefore lower the price (check supply and demand curve, S1 curve in pink). This will generate the original quantity of iPhones in the market but at a lower price. Another way is to advertise the product and create customer loyalty to make the demand for iPhones inelastic (look at graph). If the demand becomes inelastic, then if the price is raised, the quantity demanded will not fall by much in comparison. As long as Apple wants to maintain a market in China, it will have to make changes in its marketing strategy.
 * EVALUATION:**