Social Studies 10

Task 2: iPhone Demand Outstrips Supply in China

1.What is the “questions” or “problem”?

  • Because of the high demand for iPhones, there are not enough products to supply the people in China.

2. What are the key terminologies and concepts? 

Shortage: when the quantity demanded is greater than the quantity supplied. 

  •  Many people want the new iPhone model but there is limited supply.

Scarce: a limited and desirable resource

  • The new iPhone model is scarce due to the shortage of the product many people in China want to buy.

Substitution Effect: tendency of consumers to subsitute a similar, lower-priced product for another product that is relatively more expensive

  • Due to the shortage and the high price of the iPhones, consumers may want to substitute the product for other smart phones (such as Android)  that are similar to iPhones but are less expensive.

Consumers’ Taste and Preference: according to the consumers’ taste and preference for the products, it can cause a shift in the demand curve.

  • Because of the popularity for iPhone increased (the consumers’ interest), there will be a higher demand for the product.

Market Size: the availability of the products to be sold to consumers and the larger market size tend to have more consumers.

  • iPhones can be bought through computers (technology), which has increased the market size around the world
  • There are only a few Apple stores in China but with the increase of the Apple stores in China, the market size of the iPhone 4 will increase, thus causing the demand to rise.

Technology: Tools or chemical process used to create the product.

  • Lots of technology used to produce iPhone 4s because of the new gadgets included in the product.

3.Who are the:

4. Find a graph to explain your problem.

5. Analysis: What is the current situation and how should decision makers proceed?

The current situation: The shortage of the new iPhone has caused the Apple company to increase their market size in order to solve the problem of high demand for the product but not enough supplies. There is an increase in demand because of the improved applications in the iPhone product and causing Apple, Inc. to increase in supply to satisfy all the people who desire the good. Although the price of the new iPhone 4 is more expensive compared to the iPhone 3, it offers a higher quality with the faster data speed. Unicom has received more than 20,000 pre-orders for the new iPhone and only 40,000 buyers were able to receive the product. The one factor of the scarce resource is the small market size of iPhones because Unicom is the only network operator in China to sell those Apple products. By increasing the market size in China, Apple may gain more profit with the more products they can supply in each store.

Decision Makers Alternatives: 

1. Continue making more supplies


  • Able to fulfill all the demand.
  • The majority of people will continue to wait for the Apple product due to the popularity and consumers’ taste.
  • Still be able to make a profit.


  • The supplies will take time to produce.
  • Some people may not like to wait and instead buy a different type of smartphone from a different company.

2. Decline the people who want to be on the waiting list.

  • There will be a profit for Unicom and Apple.
  • No more products will have to be supplied.


  • There will be many angry customers who want the iPhone.
  • Although there will be a profit, limited amount of people who could buy the product will reduce the overall profit Apple/Unicom could make.
  • Some applications (e.g. Facetime) cannot be used often due to the limited amount of people who possess the iPhone 4.
  • Very busy for the companies on the day the product is released because the people know there is only a limited supply.

3. Only sell the iPhone 4 to the people who have never owned an iPhone.

  • Reduce the amount of demand, thus allowing more people experience having an iPhone.
  • No shortage of the product.


  • Unhappy customers and people because they want the new iPhone but cannot have one.
  • May reduce the amount of demand and  leave lots of unneeded supply, thus Apple/Unicom will loose profit.
  • People may not buy the newest iPhone until the next year, because of the consumers’ expectation that a new iPhone will be released in the future.
Given the cost/benefit analysis, which of the alternatives is best?
— By looking at the different alternatives, the first choice is the best because it is most beneficial out of the other two. While the second and last alternatives have three to four negative effects, the first choice only has two. Also, the first choice has the most pros than the rest of the alternatives. The choice seems to be able to fulfill all the demands for the iPhone and does not permit any person from obtaining one.

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