Market for Iphone5

  For this article, I am going to talk about  recent problems faced by Apple from a China company 'Workers in China strike over Iphone 5 labor Demands' written  by Adam Gabbatt on Friday 5 October 2012 . Recently, Apple  had sold five million new iPhones, beating first-weekend sales of its predecessor, the iPhone 4S  by about one million. But fears of iPhone 5 shortage as Chinese factory workers go on strike after being ordered to work on national holiday which is in high demand globally following its release. Pressure are on the workers to increase the quality of the phone after there have been numerous reports of complaints over damaged sets, which have reportedly been scratched and dented.

     

    A firm is an institution that hires factors of production and organizes them to produce and sell goods and services. The production function is an equation describing the relation between inputs and the maximum amount of ouput that can be produced with those inputs. So when  the Chinese workers go on strike, the amounts that they can produce will surely decrease. The company will need the following to manufacture such as advanced  materials, labor, machinery and a factory. As demand for Iphone has greatly increased, prompting our company to produce more phones. They should be able to order more advanced materials with little delay, so we consider advanced  materials to be a variable input. Labor is one and includes the human services used in any production process. They need extra labor, but  can likely increase the labor supply by running an extra shift and getting existing workers to work overtime, so this is also a variable input. That is what the Foxconn's Zhengzhou’s been doing until they ordered the labors  to work on national holiday . The equipment on the other hand, may not be a variable input. It may be time consuming to implement the use of additional equipment. It depends how long it would take us to buy and install the equipment and how long it would take us to train the workers to use it. Adding an extra factory is certainly not something we could do in a short period of time, so this would be the fixed input.

   Next, quantity of labor employed must increases so that there is more output. This will result into marginal product increase initially but eventually decreases and so as  average product increases initially but eventually decrease. Increasing marginal returns arise from increased specialization and division of labor. Diminishing marginal returns arises because each additional worker Zhenghou factory of  has less access to capital and less space in which to work. As a firm uses more of a variable input with a given quantity of fixed inputs, the marginal product of the variable input eventually diminishes.  The high demand of the new Iphone 5 put pressure on staff to increase the quality of the phone. If the factory workers keep doing this, than there will be shortage. It is situation where the quantity available or supplied in a market falls short of the quantity demanded or required at a given time or price.

    

      There are a lot of factors that can  influence  the elasticity of demand. Under the closeness of substitutes, this products, Iphone can be classify as elastic. Now days, the close substitutes for phones is getting more and more, thus people will have more alternatives to choose. Another factor which influences elasticity of demand is the amount which is spent by the consumer on a good. If a consumer spent substantial part of his or her income on a good then any change in price of a good will lead to consumer switching from that good, however if consumer spends only small part of his or her income then change in price of a good will not lead to a drastic drop in sales of the good. So if a consumer is thinking of buying an Iphone will pay higher attention to any change in price of a good, as compared to when he or she is taking decision regarding buying an apparel from supermarket. Under, the proportion of income, the greater the proportion of income consumers spend on a good, the larger the elasticity of demand for the good.

   

    When it comes to tax, the division of the tax between buyers and sellers depends on the elasticities of demand and supply. In this case Iphone 5 is knowed as perfectly elastic demand because it has a lot of more substitutes  . If they cannot afford an Iphone they can still go to others phones like Nokia, Samsung and more. So, to prevent this from happening, the producers would take the burden of taxes so that the revenue will not decrease so as the quantity demand. In contrast, for products that are inelastic like cigarettes and beer, producer will give the taxes to the consumers because no matter expensive the goods is, the smokers and alcoholic will still pay for it. Thus,  revenue and quantity demanded increases.

     For short run technology constraints, total product is the total output produced in a given period. The marginal product of labor is the change in total product that results from a one-unit increase in the quantity of labor employed, with all other inputs remaining the same. They should offer the labours a high wages to attract to work. In this case, Zhenghou should have offer the workers a high wages if they want them to work on national day.  The average product of labor is equal to total product divided by the quantity of labor employed. Therefore the quantity of labor employed must increases so that there is more output. This will result into marginal product increase initially but eventually decreases and so as  average product increases initially but eventually decrease. Increasing marginal returns arise from increased specialization and division of labor. Diminishing marginal returns arises because each additional worker has less access to capital and less space in which to work. As a firm uses more of a variable input with a given quantity of fixed inputs, the marginal product of the variable input eventually diminishes.

  The conclusion is, Apple's iPhone 5 may have been impacted after thousands of factory workers in China went on strike. It is possible that there is a shortage in the Iphone 5. If this happen, consumers will turn away from their product  and go for other smart phones products like Samsung, Nokia, Blackberry and more.  As a result, quantity demanded for their products will decrease and their revenue will also fall. ,  Therefore, Apple company must take care of its production and in the meantime,  make sure the workers are happy and treat them fairly.

Posted by Muhamad Azzamudin