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Cell Phone Industry Essay

2044 words - 9 pages

Cell Phone Company
Clair Smith
ECO/561
March 17, 2014

Cell Phone Company
Cell phones have evolved over the years since 1973 when Dr. Martin Cooper while working for Motorola invented the first personal handset (Keith, 2004). In 1988 another important event occurred for the cell phone industry, which is when The Cellular Technology Industry Association is formed (Keith, 2004). The association is what helped form the cellular industry into the empire it is today (Keith, 2004). Cell phones are very popular now and many people have cell phones, but no longer have a landline. The population is growing and the need for more cellular providers is great. The increasing demand is why I want to ...view middle of the document...

Not only may they differ in design, but they can also differ in plan that is offered for the cell phone.
When opening a new business to join an industry it important to know if the product or good is elastic or inelastic in demand. If a product is inelastic it is unaffected to a change in price (Wordpress, 2014). In other words if a products price goes down people will not necessarily but that much more with the drop in price if the product is inelastic (Wordpress, 2014). When a product is inelastic and the price goes down the total revenue will actually get smaller and with the price goes up total revenue will go up (Wordpress, 2014). The opposite occurs when a product is elastic. If a product is elastic the change in price will affect total revenue for a product. So if the product price drops for an elastic product more people will purchase the product, which will increase total revenue and as it goes back up less people will purchase the product so total revenue will go down (Wordpress, 2014).
The cell phone industry while many people may think it is a necessity, cell phones are not, but in the world today they may be coming more and more of a necessity. In saying that though the high tech multi-optional cell phones in the world today are really luxury items, which makes cell phones an elastic product. People will buy cell phones, but may not afford the really nice expensive ones that they really want, but when those cell phone prices drop sales go up. If the price of the cell phones goes up, sales and total revenue will go down. The company will offer a wide range of cell phone services from contract plans to pay as you go plans. This will help ensure the company is able to meet all consumer’s wants and needs in their price range. This will help increase revenue and help to minimize costs.
Two other important aspects of a product and the supply that is offered it marginal cost and marginal revenue. Marginal cost is any change in the cost of making or producing more (Investopedia, 2014). Marginal revenue is the increase in revenue from selling additional products (Investopedia, 2014). In other words one thing any cell phone company needs to be aware of is the cost of producing each cell phone and the revenue that comes from selling each cell phone. When a supply of cell phones increases the equilibrium price will drop (McConnell, Brue, & Flynn, 2009).
Marginal costs and marginal revenue can be affected with how a product is priced. For example if the price of the cell phone goes down the company will sell more phones and will need to produce and supply more for the demand. When the company has to produce more the marginal costs go up, but as long as the marginal revenues go as well the company will be good. If the company raises the price though they would have to produce less since the demand will be lower and the marginal cost will go down, but if the price goes up and the company does not slow production the marginal cost...

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