Using economic analysis, explain the possible causes of the increase in the sales of electronic goods such as mp3 players in recent years. [8]

Technological advancement in recent years have allowed for electronics to be produced at costs considered unimaginable just a few decades back. The discovery of silicone based transistors and implementation of widespread computer aided manufacturing and automation have allowed manufacturers to create components for electronics at prices never before seen. The cost of memory for example has decreased by a factor of a billion since the 70s, all the while it became smaller, faster and more reliable. Moreover, the creating of better products such as smartphones which offer far more features than previous electronic devices has also direct led to a shift in supply as the price “per feature” has fallen. This has allowed suppliers to provide higher quality electronics at lower costs, in leading to an increase in supply, which leads to the equilibrium point shifting to the right, thus increasing the overall quantity consumed and leading to the recent increase in the sales of electronics.

In terms of demand the increased need for electronics in the modern world have led to a fall in the elasticity for demand for such products. While 30 years ago, regular individuals did not need a computer or internet connection, in today’s climate of digital purchases, payments, job applications and communication, it is almost impossible to operate without such electronic devices. Another factor affecting demand is likely to be the increase in advertising of electronic products which is likely to also increase the demand for electronic products and make it less elastic. It is also likely that the recent increase in advertising has caused a shift in the tastes of consumers leading them to Thus the demand increases and becomes more inelastic, causing the demand curve to shift to the left and become more horizontal.

Thus, due to technological advancements in the production process for electronics, and changes in the consumers’ need and desire for electronics, both the demand and supply curves have increased leading to a shift to the left of the point where the consumers’ willingness and ability to buy electronics equals the suppliers’ incentive to supply to produce them, in turn showing the increase in sales of electronics seen in recent years.