Market_Equilibration

Market Equilibration Michael Hintz Phoenix University Market Equilibration The mobile phone market is one of the markets that continues to reinvent itself and still has not fully matured yet. Not only has technology changed but service levels, pricing, and contracts have all changed in an attempt to capture the burgeoning consumer desire for mobile phone service. This author believes that even though the iPhone has experienced historic levels of consumer demand, the same market equilibrating effects have been experienced by Apple with the iPhone. Apple’s iPhone Market Equilibrium The initial launch of the iPhone over 4 years ago was a very interesting marketing study. Apple had begun to regain some of their image with the iPod and iTunes music library. They was so much pent up demand y the time the phone was launched the price was set at 398$ and still required customers to change cell phone companies to AT&T. This is a very good example of the power of intense consumer demand. The following 3 years saw very large numbers of customers converting to the iPhone including this author. The reality of AT&T service and the introduction of an upgraded iPhone 4 illustrate the “invisible hand” of the change in market demand. After this new phone and declining service are in place, the same phone that was 398$ is now only 98$ , although it still requires a 2 yr service agreement. This change in pricing would certainly follow the concepts the Adam Smith had in mind when he first coined the term invisible hand of the market in The Theory of Moral Sentiments. “ For Smith, the invisible hand was created by the conjunction of the forces of self-interest, competition, and supply and demand, which he noted as being capable of allocating resources in society” (Wikipedia). As smith explained the demand for the first issue of the iPhone dropped as the new version was released and the initial ferver was ballanced by the reality of the AT&T cellular service which was recently voted worse in Consumer Reports Magzine (Consumer Reports Testing Team, 2011). To combate this declining demand and increased competition the exclusive agreement between AT&T and Apple has been changed. Apple just recently announced This step should help to improve the demand for the iPhone technology if coupledhe agreement to allow Verizon to market the iPhone on their superior cellular network. It will be interetsing to see what the final price will be for the phone and service agreements. The principles of economics would suggest that the price will increase at some point to respond to the renewed market demand. Referrences Consumer Reports Testing Team. (2011, January). Best Phones & Plans. Consumer Reports Magazine , 26-38. Fess, P. E. (1993). Accounting Principles. Cincinnati, OH: South-Western Publishing Co. Kaplow, L., & Shavell, S. (2007). Moral Rules, the Moral Sentiments, and Behavio: Toward a theory of an Optimal Moral System. Journal of Political Economy , 115 (3), 494-514. Wikipedia. (n.d.). Wikipedia: Invisible Hand. Retrieved January 19, 2011, from Wikipedia: http://en.wikipedia.org/wiki/Invisible_hand