ECO 401 GDB Solution Idea
#1
ECO401 Economics GDB 2017

Question Title: Market structure
Question Description:
The Case:
Smartphone is a mobile phone which has features of personal computer like operating system, web browsing and the ability to run software applications. The first smartphone was IBM's Simon, which was presented as a concept device (rather than a consumer device) at the 1992 COMDEX computer industry trade show. In 1999, the Japanese firm NTT DoCoMo released the first smartphone to achieve mass adoption within a country. Smartphones became widespread in the late 2000s. There are well known companies of smartphones like Samsung, Apple, LG, Lenovo, ZTE, Huawei, OPPO, Vivo, Sony, RIM, HTC, Nokia and Xiaomi etc. Samsung is the leading smartphone seller in 2016. Its market share in third quarter of 2016 is 20% while apple is the second largest smartphone seller with 12.5% share. Huawei is third largest and its market share in third quarter of 2016 is 9.3%. Samsung market share was 32.5% in 2013 which has been reduced in 2016.Now apple and other smartphone seller companies are close to Samsung. Day by day, competition among companies is increasing.

Requirment:
Being a student of economics, identify the market structure of smartphone selling market. Also explain how increased competition will impact the smartphone prices.




Solution:
Market Structure: It’s an example of a perfect competition where there are many competitors selling homogenous products have similar features.
Effect on Pricing of Smartphone:
Due to many sellers of smart phones in the market the prices of smart phones are tending towards low. Due to perfect competition every firm want to take control of the market. For attracting customers, each firm will want to sell smart phones at prices lower than its rival firm and this will lead to lower prices of smart phones resulting in normal profits for the firm. So, increasing prices will lead towards low prices of smart phones in future.



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