Iphone Microeconomics in China

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The most recent popular cell phone to be introduced is the iPhone. Aside from the multiple grammatical errors in the article, I found it interesting that there was a situation where there is an extremely high demand for a product but no supply. Due to the lack of sellers in the market, it has created an illegal black market monopoly for the iPhone. The legal way to supply cell phones in China involves a monopoly of two state-owned companies that act as cellular operators who demand a profit-share on the iPhone. This is one of the few times where there may be an excessively large demand for a product but it isn’t profitable for the company to supply it to the market.

China is the world’s largest cellular market with a consumer base that is always looking to stay up to date with new technology. Due to this large market, it in turn can create an exponentially large demand on a new technologically sophisticated phone. The consumers have the demand but there is no supply, which results in consumers buying the product wherever they can. Rogue dealers have a monopoly over consumers in the market. The dealers are refusing to follow any rules and there are no antitrust laws that they have to follow when they supply the iPhone. With the demand so high they can charge excessively high amounts for the phone and have no price ceiling to worry about. Apple already made their money off of the phone by selling it to a legal dealer who then, without Apple’s knowledge, sent the product to China. The cost to send the phone to China is out of the equation for Apple and now must be evaluated by the dealer. He must include the original cost of buying the phone and the additional cost to ship the phone which will increase his marginal costs.

The other, legal, monopoly mentioned in the article is the state-owned cellular operators. Apple wants to setup an agreement with one of the two operators to be the sole provider of the iPhone. The best option would be the provider who has...
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