Current Economic Event

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One of the reasons there were long lines for consumers wanting to purchase the iPhone 7 in late 2016 and early 2017 was that demand outstripped availability. As a result, through pre-ordering the items, the majority of consumers left the product stores empty-handed. As compared to previous years, the situation impacted the majority of consumers. One of the phone’s features is a dual rear-facing camera, which was not present in previous models of the product (Webb, Alex, and Mark Gurman). Because of the phone’s sophistication, it will necessitate further supply components throughout production. However, due to delays in the delivery of these parts, there were some delays while on the other hand production attained was not as anticipated. The main reason for this was because the shipment of components such as dual lens was not in huge volumes.

The declining trend in the global smartphone sales was one of the reasons Apple was cautious in the production of the iPhone 7. Despite the quadrupling of the pre-orders for the iPhone 7, Apple required holding one of its highest inventory for the past four years. The delivery of pre-ordered phones would be to countries such as New Zealand, Japan, Australia and other countries to the east of the hemisphere. However, the reports by communication companies such as Verizon showed that the pre-order rates were likely to decrease. For this matter, the future expectations of sales made Apple cut down the production capacity (Webb, Alex and Mark Gurman). On the supply side, the advertisements conducted by the mobile carriers in the United States were aggressive which led to the growth in demand. However, it is important to note that one of the past experiences Apple had was in 2013 where demand was overestimated resulting in the imposition of tight measures in supply.

Analysis of the Economic Principles

One of the determinants of demand is the tastes and preferences of consumers. The case of the iPhone 7 relates to tastes and preferences as the consumers have a higher taste for advanced technological capabilities. The new iPhone would have a dual back-faced camera which was not the case for the previous phones. On the other hand, the extensive advertisement and promotion of the iPhone 7 by the mobile carriers in the United States has made the consumers of mobile products consider it more favorable compared to other products (Gibbs, Colin). Subsequently, the demand for the products increases over time. The impact of greater advertisement on the demand curve is that it makes it shift upwards.

The number of individual consumers forms the aggregate demand in the market. For this reason, the high number of iPhone customers in the United States contributed to the excessive demand. The growing number of consumers of a given products depends on their ability to substitute a product with another. The advanced technological specifications and the disposable income of smartphone customers in the United States have enabled them to replace other products such as Samsung S7 with the iPhone 7. On the other hand, the disposable income of consumers outside the United States has made Apple expand to other markets such as Australia and New Zealand (Gibbs, Colin). Thus, there has been excessive demand over the supply of the product. The decline in supply could also be explained due to increase in the production costs associated with the new components such as the dual lens.

Works Cited

Gibbs, Colin. “Pixel ‘Demand Is Exceeding Supply’ At Verizon Stores: Wave7 | Fiercewireless”. Fiercewireless.Com, 2017, http://www.fiercewireless.com/wireless/pixel-demand-exceeding-supply-at-verizon-stores-wave7.

Webb, Alex and Mark Gurman. “Apple Hasn’t Made Enough Iphone 7S”. Bloomberg.Com, 2016, https://www.bloomberg.com/news/articles/2016-09-16/iphone-buyers-may-be-let-down-as-apple-supply-lags-behind-demand.

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