Econ Assignment

Mobile Retail Shop Industry
Introduction to Economics-BSB 5007

Tutor: Eman Asker
Bahrain Polytechnic
Done by
ID
Amal Darwish
201101509
Kawther Busehail
201101555
Lyila Kashtakar
201100852
Zahra Ali
201100963
Class
Wo3
Mobile retail shops industry.Assessment1- Group Report
Table of Contents
1.0-Introduction ...........................................................................................................3
Microeconomics ...........................................................................................................4
2.0-Market Structure ....................................................................................................4
2.1-No barriers to exit or entry the market ...................................................................4
2.2-Many sellers........................................................................................................5
2.3-Many buyers .......................................................................................................5
2.4-Homogeneous product.........................................................................................5
2.5-Buyers and sellers are price takers .........................................................................5
Demand and Supply ......................................................................................................6
3.0-Demand .................................................................................................................6
3.1-The Law of Demand .............................................................................................6
3.2 Demand Curve Shift .............................................................................................7
4.0 Supply .................................................................................................................. 14
4.1 The Law of Supply .............................................................................................. 14
4.2 Shift factors of the supply curve .......................................................................... 14
5.0 Positive and Normative analysis .............................................................................. 17
6.0-Factors of production ............................................................................................ 18
7.0-Scarcity ................................................................................................................ 20
8.0-Opportunity cost ................................................................................................... 21
8.1-Production possibility frontier-(PPF) .................................................................... 21
9.0-Good type ............................................................................................................ 23
10.0 Price discrimination ............................................................................................. 24
10.0-Price Elasticity of Demand .................................................................................... 25
10.1-Price Elasticity of Demand................................................................................. 25
10.2-Price elasticity of demand for Samsung-Galaxy-S3 ............................................... 25
11.0-Macroeconomics ................................................................................................. 27
11.1-GDP................................................................................................................ 27
11.2-Aggregate demand........................................................................................... 28
11.3-Circular flow of income ..................................................................................... 29
12.0-Conclusion .......................................................................................................... 30
13.0 References .......................................................................................................... 31
14.0 Appendices ......................................................................................................... 36
Page 2 of 40
1.0-Introduction
Mobiles have created a remarkable impact on people's life in terms of facilitating
communication. The idea of mobile industry is originally referred to World War-II because of
military need for wireless technology. Despite that Martin Cooper produced the first actual
cell phone in 1973, cell phones were not available to the public before 1984 which is the
start of mobile retail industry (ThinkQuest, n.d)[1]. Generally, there will be a sharp increase
in the number of mobiles sold around the world during the following three years which will
lead to 1.7 billion units in 2015-(Islam, 2012)[2].
According to BMI-report, mobile sales in Bahrain contributed with 12% of the total
consumption on electronic products in 2010. While the sale increased from US$ 73mn in
2011 to US$ 79mn in 2012, which is equivalent to 8% of increase. Additionally, the CAGR of
mobiles market in Bahrain is projected to be 8% between 2012 and 2016 (BMI, 2012)
[3]
Mainly, there are more than 220 mobile shops in Bahrain which classifies this industry in
Bahrain as a perfect market competition (Bahrain Yellow, n.d)
[4]
. Samsung, Apple and
Blackberry mobiles are currently the most demanded mobiles in Bahrain. Generally, the GCC
countries have contributed by 21% as an average of the total market share of Samsung and
it is estimated by 19% for Bahrain particularly (Saxena, 2012)[5]. Retailers decided to increase
retailing mobiles in Bahrain since this industry here is expected to grow up to 0.76 billion BD
by 2015 with a total consumption of 78 million-BD on mobiles field (Saxena, 2012) [5].
Therefore, mobile shops are a growing market which makes the industry significant.
It benefits Bahrain economy by tempting foreign businesses to invest in Bahrain, creating job
opportunities for Bahrainis, increase the consumption and government spending to improve
the country. According to the circular flow of income, this will lead to flourishing Bahraini
economy, GDP and aggregate demand which will increase the standards of living for citizens.
Page 3 of 40
Microeconomics
2.0-Market Structure
Market structure is the approach of how the market is organized, based on the number of
businesses that are operating in different or same area of specialization. The four main types
of market structure are as the following (AcadimicWritingTips.org, 2011)[6].
Figure 1: Types of Market Structure
Figure 2: The Characteristics of the four Market Structures (Economics Online Tutor, 2012)
[7]
The mobile retail industry in Bahrain is considered as perfect competition market for the
following elements.
2.1-No barriers to exit or entry the market

Entering business world in Bahrain is free of many barriers. To illustrate, no taxes are forced
on mobile shops businesses. Also, the foreign are permitted to 100% ownership of their
business. Additionally, Bahraini and GCC citizens can own lands in all areas of Bahrain.
Bahrain is the Middle Easts freest economy and many of credit and commercial loan
arrangements are available to investors (BIIP, 2011) [8].
Page 4 of 40
2.2-Many sellers
There are over 220 mobile shops in Bahrain (Bahrain Yellow, n.d) [4]. For example, in CityCentre Mall, there is many mobile shops such as: Sharaf DG, iMachines, Fono (Bahrain City
Centre, 2012)[9] .Also, there is a commercial complex that called GOSI, where there is a large
number of mobile shops (Fawaz, 2010)
[10]
. Moreover, Bahrain telecommunication
companies started to sell Smartphones lately (Zain, 2012).[11] Therefore, it is concluded that
there are many sellers of mobiles in Bahrain.
2.3-Many buyers
TRA stated that the number of mobile subscribers in 2011 had reached 1.7 million. This
number presents that 133% of the mobile penetration rate, which is one of the highest rates
in the Middle East (TRA, 2012)[12]. The large number of mobile users illustrates that there is
many mobile buyers in Bahrain.
2.4-Homogeneous product
Mobile shops in Bahrain sell a wide range of mobiles and their accessories because of the
demand on them. Mostly, the shops sell the latest Smart phones for example: IPhone4,
Blackberry-9900, Samsung Galaxy-SIII, Samsung Galaxy Note and Blackberry-9790 (Pingdom,
2011)[13]. Since the mobile shops sell the same products, so the products are Homogeneous.
2.5-Buyers and sellers are price takers

Mobile shops in Bahrain accept the prevailing prices of their products in the market and they
dont have any influence over price setting (Economic Glossary, n.d)
[14]
. The prices of the
mobiles are similar in many shops because shops try to fit in the market prices to attract
customers. For example, Geant Hypermarket sells Galaxy-SIII for 199.990 BD (Appendix1)[15]
while 7phone mobile shop sells it for 215-BD (Appendix2). Clearly, there isn't a big different
between the prices. However, if a shop set its prices higher than the market level,
consumers will buy from other shops since there are a lot of sellers and they have different
options which will lead to a lost resulted from the intense competition required to fit in the
market prices. The buyers are also price takers as accept the mobile price as it is and they
cannot change it.
Page 5 of 40
Demand and Supply

Letellier (n.d) states Demand is not what we want to buy, but rather what we are able and
willing to buy (para.1)17. He, also, states that supply is the same as demand but from the
suppliers end, which means the quantity the supplier is willing and able to sell while
changing the price [18].
3.0-Demand
3.1-The Law of Demand
This concept states that the price
of a good or service is linked by a
negative relationship with its
quantity demand, ceteris paribus.
Meaning that when the price of a
particular
product
or
service
increases, quantity demanded for

that product or service will
decrease. The demand curve is
Figure 2: Reducing the price of iphone5 in GSF Hypermarket.
used to represent this negative

relationship graphically. Furthermore, changing in prices would cause a change in quantity
demand which is called a movement along the demand curve (Letellier, n.d)[17]. For
example, GSF Hypermarket stated through their Facebook page that iPhone-5 is sold for
329.999BD, from the first of December until 10th of the same month. In fact, the original
price was 399.999BD (GSF Hypermarket, n.d) (Appendix-3)[19]. As a result of reducing the
price, the demand would increase in the same period.
One further example is about Apple-Company in USA. In particular, Apple decreased the
price of iPhones from 599$ to 434$ in 2008 which led to tripling the demand of iPhone (from
270,000 to 1,119,000) (KJS, 2009)[20]. The curve below indicates how the reduction in iPhone
price has resulted in increasing the demand.
Page 6 of 40
Figure 3: The Demand curve of IPhones in USA in 2008
3.2 Demand Curve Shift

besides the price, There are other factors that cause a shift in the demand curve indicating
that the change in that factor causes a change in demand (Bahrain Polytechnic, 2012)[21].
-Population
The increase in population will result in increasing the demand since the existing of more
people in the country can increase the demand for products and services. In Bahrain, BEDB
stated that there is an increase in the total population of Bahrain by 2.81% from 2010 to
2011, which led to a total number of 1,234,571 of population (Appendix-4)[22]. The previous
increase in Bahrain population was accompanied by a vast rise in number of mobile
subscribers by 8.8% as it is published in the TRA Report in 2011[12] which is an indicator of
increasing the demand during the same period. In other words, the increase in population
led to an increase in the demand for mobiles, which led to a right shift in the demand curve
during the same period.
Figure 5: The Demand Curve of mobiles in Bahrain from 2010 to 2011. Page 7 of 40
1,800,000
1,600,000
200,000
1,556,666
1,401,974
1,440,782
1,115,979
400,000
907,433
600,000
767,103
800,000
649,764
1,000,000
390,253
1,200,000
1,693,650
1,400,000
300,829
Mobile Subscribers in Bahrain
The Growth in the Number of Mobile Subscribers in Bahrain

between (2002 -2011)
Mobile Subscribers
0
Source: TRA Analysis, 2012
Figure 6: The growth in mobile subscribers in Bahrain between (2002 2011).
Income
The increase in demand can be an outcome of increasing in the household income level
since people who have higher income are able to buy more products. According to Al-Wasat
interview with a number of mobile shops owners in Bahrain, Sayyed Mohammed Al-Wadai,
the owner of Al-Ameed shop for communication-technology, claimed that nowadays
Bahrainis buy Smartphones from his shop more than Nokia phones, even though
Smartphones are expensive (Al-Wasat, 2011)[23]. This is related to the fact that governmental
employees' salary has increased to 402 BD as minimum, while it has increased to 542 BD as
average for privately employed Bahrainis in 2009 (BEDB, 2012) (Appendix-5)[24]. Therefore,
the higher level of income has increased Bahrainis demand for expensive mobiles
(Smartphones) which has resulted in shifting the demand curve of smart phones in AlAmeed Shop to the right (Graph A). However, the demand for Nokia phones in the same
shop has decreased which led to shift the demand curve to the left (Graph B).
Page 8 of 40
Graph (A)
Graph (B)
Furthermore, Smartphones are seen as normal goods since Bahrainis demand for them
increased when they have had higher income. In contrast, older models like Nokia are
inferior goods since Bahrainis are not buying them anymore despite of the increase in their
level of income.
-Individual Preferences
The demand is also affected by what people prefer to buy according to their tastes.
According to an interview with Ali Al-Halawaji, the owner of Al-Hoot phones store, Bahrainis
prefer the high technology mobile (Al-Wasat, 2011)[23].Therefore, the demand for
Blackberries and IPhones has increased in his shop despite of their high prices, so the curve
shifted to the right. Based on TRA analysis, the number of blackberry subscribers has
increased from 42 thousands in 2009 to 94 thousands in 2010 which proves the increase in
the demand for blackberries and, therefore, the demand for smart phones [12].
Page 9 of 40
Blackberry Subscribers (Thousands)
Figure 7: The Demand Curve for Blackberries.
The Growth in Blackberry

Subscribers from 2009 to 2010
100
90
80
70
60
50
40
30
20
10
0
94
62
Blackberry
Subscribers
(Thousands)
42
12
Q2 Q4 Q2 Q4
2009 2009 2010 2010
Source: TRA, 2012
Figure 8: The Growth in Blackberry subscribers from 2009 to

2010
-Substitution good
This term is referred to the alternative goods that can be used for the same purpose
(Business Dictionary, n.d)[25]. For this kind of goods, the increase in price of a particular
product would decrease the demand for it since people will shift to the product that
substitutes it. For instance, the high price of iPhone5 (349.990BD) in E-max [26] would shift
people to buy Galaxy Samsung-S3 from Sharaf-DG, which costs 246.14BD[27]. So, Samsung-S3
is a substitution for iPhone5. Therefore, the demand for iPhone5 from E-max will decrease
and shift to the left (Graph C) while demand will increase for Samsung Galaxy-S3 and shift
the curve to the right (Graph D).
Graph (C)
Graph (D)
Page 10 of 40

Further example, according to GSF Hypermarket Facebook page, the hypermarket sold
Galaxy Note II for 229.990 BD, from the first of December until 10th of the same month
(Appendix-6)
[19]
. However, Lulu Hypermarket sells the same mobile for 269.900BD
[28]
Therefore, the demand for Galaxy Note II from GSF Hypermarket will increase and shift to
the right on that period(Graph E) while it will decrease from Lulu Hypermarket and shift to
the left(Graph F).
Graph (E)
Graph (F)
Complementary Goods
They are the goods that are used together (Business Dictionary, n.d)
[29]
. Generally, the
increase in the price of one complementary good would cause a decline in the other one. For
example, SIM cards and mobiles are complementary goods. To illustrate, the demand for
SIM cards will increase and shift to the right since the prices of older models of Samsung
phones are decreasing in Sharaf-DG to 7.08 BD which is low comparing to others
[30]
Therefore, the demand curve for SIM cards will shift to the right.
Page 11 of 40
Figure 9: The Demand Curve for SIM Cards.
However, there was a decrease in the demand for mobiles in 2009 because people had to prepay
for registering their SIM cards. The imposition of additional cost regarding the SIM cards have
made people retreating from buying or demanding for more phones which has resulted in shifting
the demand curve to the left in 2009 (TRA, 2012)[12].
Figure 10: the demand Curve for mobiles in 2009
Page 12 of 40

The internet packages offered by Zain, Batelco and Viva with the smart phones are also
complementary goods since they dont sell the Smartphones without the package. For
example, Zain has the highest price of the unlimited data package with Galaxy Note I which
is 33 BD per 12 months, while it is 30 BD for Viva and 25 BD for Batelco (Appendix-7) [31].
Therefore, the demand for Galaxy Note I will decrease from Zain because of the high
package price which will lead to a left shift in the demand curve (Graph G). However, the
demand will increase from Viva and Batelco which will result in shifting the curve to the right
since the price of package is lower (Graph H).
Graph (G)
Graph (H)
Page 13 of 40
4.0 Supply
4.1 The Law of Supply
The concept means that there is a direct relationship between the quantity supplied of a
product and its price. The changes in price -result in a movement along the supply curve
indicating a change in quantity supplied (Letellier. n.d).[27] For instance, when a new product
is launched into the market, it is usually priced high, and that is usually the time when the
suppliers supply the most quantity of this product in order to gain more profit. Since the
launch of Apples new Smartphone in the market, iPhone 5, retailers in Bahrain such as
Sharaf-DG decreased the price of the iPhone-4S from BD306.67 to BD287.18 to launch the
new version at BD482 (Product details, n.d) [32] .Thus, Apple and other retailers decreased
their supply process of the iPhone-4S which caused a movement to the left in the supply
curve.
Figure 11: Decrease in supply of iphone5 in Sharaf DG because of

decreasing its price.
4.2 Shift factors of the supply curve

There are other factors than the price that cause a shift in the supply curve indicating that
the change in that factor causes a change in supply (Bahrain Polytechnic, 2012) [21].
Prices of inputs
The price of inputs affects the supply curve to shift either to the left or the right. For
example, if the price of a component increases, the producer will not be able to produce the
same amount as it used to when the price of that component was less (Bahrain Polytechnic,
Page 14 of 40

2012) [21] . The same principle applies for the mobile retail industry. However, in Bahrain, the
commercial properties rental rates fell (Macdonald, 2010).[33] As a result, mobile retailers
will not pay high rents and will be able to invest more in their revenues and supply more
quantities of mobile phones. This will have the consequence of shifting the supply curve to
the right as an indication of an increase of supply.
Figure 12: The supply Curve in case of reducing the price of

commercial property.
Number of firms in the market
The mobile retail industry in Bahrain is in the perfect market competition because of the
continuous increase in the number of mobile retail shops due to the reasons mentioned in
the market structure section of this report. In reference to the mobile retail industry in
Bahrain, retailers are very wide spread which caused a fierce competition in the market
(besides Batelco, Zain, Viva, Sharaf DG, Virgin, Kondor, Carrefour and Geant) would be STC
Phones, Mask Mobiles, Sky International, Al-Naser Mobiles, Sahara Phones, Adliyah mobiles,
Mega Max Mobiles and many more (Mobile/Mobile cards/Accessories, n.d)[34]. The
number of all these retailers resulted in the increase of the supply of the Samsung Galaxy
smart phones and a shift of the supply curve to the right.
Figure 13: the supply curve when number of mobile

retailers increase.
Page 15 of 40
Subsidies and taxes
Bahrain is focusing on creating job

opportunities, preparing Bahraini
citizens to fill these jobs through
training programs, and attracting
international investors. Gradually
reducing subsidies and enforcing
taxation are some of the plans that
Bahrain is most focused on (The
report,
n.d)
[35]
Reducing Figure 14: The impact of imposing more tax and decreasing
subsidies and introducing taxation subsidies on the supply curve

mean that the government will not support and pay for the products that retailers supply.
Hence, they have to pay more in order to import/buy the products from the producers or
the wholesalers to resell the product, plus the taxes that will be applied in the future, which
means that they will not be able to afford a big amount of commodity. This consequently
will lead to a reduction in supply of mobile phones and a shift in the supply curve to the left.
Wages
In case of employees wages

decreased, retailers would be
able to use their production costs
to supply more mobile phones
instead of spending them on
their
employees
(Bahrain
Polytechnic, 2012)[21]. In spite of

that, the average wages of
Bahraini
employees
has
increased from BD440 in the Q4 of
Figure 15: The impact of increasing wages on the supply curve

2010, to reach BD489 in the same of iPhone-5.
quarter of 2011, which is a 11.1% increase in real terms (Increase in total employment by
the end of Q4 2011 to reach 618,036 workers, 2011).[36] This concludes to the fact that the
mobile retailers will not afford to buy more of the iPhone 5 from the producer/wholesaler as
they increased the wages of their employees. Therefore, the supply of mobile phones will
decrease and cause the supply curve shift to the left.
Page 16 of 40
5.0 Positive and Normative analysis

Positive analysis is an analysis that concentrates on providing descriptions or factual
statements in order to answer the question of What is or What will be (Riely, 2011)[37].
An example of positive analysis in regard to this industry is that the number of mobile
subscribers has reached 1,556,666 users by the end of 2010 as it was published by the TRA
(2011) (Appendix-10) [12]. Another example is that there are 12 mobile shops in Seef mall
(Appendix-8)[38].These statements are considered as positive analysis since their contents are
factual information that can be proved or disproved.
Normative analysis is an analysis that is based on personal opinion and judgment in order to
answer the question of What ought to be(Riely, 2011)[37].
For instance, it is stated by Steve Kovach (2011) that people should buy iPhones instead of
Android phones according to his own judgments in term of Battery life, design and available
applications
[39]
. As this is completely dependent on Kovachs opinion, it is considered as
normative analysis.
Page 17 of 40
6.0-Factors of production
The factors of production are the resources required to produce services or goods. These
factors are classified into five basic groups: Natural Resources, Labor, Human Capital,
Physical Capital and Entrepreneurship (factors of production, n.d.) [40].
Natural resources
These are the resources provided by the nature and used to produce goods and services.
Examples include spaces-on-ground, seas, lands, oceans, air...Etc (gcse economics-factors of
production, n.d) [41] .As for this industry, the natural resource needed is commercial land.
The area of Bahrain is limited as it is estimated as 711 Km2. Even-though, lands in general are
unaffordable for many Bahrainis (Abu-Safi, 2005)
[42]
. Hassan Kamal, the Chairman of the
association of the real estate sector of Chamber of Commerce and Industry of Bahrain,
states that the demand for commercial lands has decreased by 40-50% during a year and a
half. He also stated that the commercial land in Bahrain is limited because Bahrain is a small
country with a small area (Editor of Economic Affairs, 2012).[43]
Labor
Labor is both the physical and mental effort given by individuals for the production process.
It includes workers, managers, supervisors...Etc (gcse economics-factors of production,
n.d)
[41]
. In Bahrain, the labor force was estimated at 380,000 in 2005 which most of it
consists of young and educated people. Also, Bahraini employment in services and
commerce industry was estimated as 79%, years ago (World mark Encyclopedia of Nations,
2007) [44]. In case of mobile shops, different types of labor are needed. Examples include
Sales Men, Cashiers, Manager and Supervisors, Cleaners, Accountants, MarketersEtc.
Human-Capital
Human capital-is the level of skills, experiences and qualifications of each individual
contributing in production (gcse economics-factors of production, n.d)[41]. In this industry,
the level of skills differs from one type of labor to another. For instants, big mobile retail
shops employ managers. The managers need to have suitable level of education, high ability
to solve problems, ability to supervise other employees. In contrast, the knowledge needed
from the Cashiers is much less. Therefore, they get different amount of salaries. However,
both of their knowledge is needed to fill a gap in the organization body.
Physical-Capital
Page 18 of 40

It is the physical goods provided to produce other goods and services. It comprises of
machines, computers, tools, factories, roads etc (gcse economics - factors of production,
n.d)[41]. The mobile retail shops need to provide computers, cleaning machines, toolsEtc in
order to run the business.
Entrepreneurship
It is the initial ideas used in coordinating together all the previous resources to use them for
production. So, business's resources might be at risk by this factor (gcse economics - factors
of production, n.d)[49]. Mobile shops industry in Bahrain is highly competitive market and,
therefore, businesses in this industry are threatened by bankruptcies. Yet, VIVA is an
example of a successful Entrepreneurship. Viva entered Bahrain market in March 2010. It
has operated $340 million in Bahrain's mobile industry which has turned into great
success. VIVA recently started to sell mobiles, competing with other mobile shops (BEDB,
2008) [45].
The following table illustrates how viva used the previous resources in Entrepreneurship:
Figure 16: The usage of different resources by viva in term of Entrepreneurship.
Page 19 of 40
7.0-Scarcity
Scarcity is the situation of having infinity wants that exceeds the limited resources available
to suffice these wants (Investopedia, n.d) [46]. For example, the low income people cannot
spend too much on mobiles because of their limited budget. Regarding this industry, scarcity
is taking a place in the area of natural resources (lands) since opening a new mobile shop
requires an available space in commercial lands. Moreover, Bahrain suffers from a lack of
commercial lands due to its small size as mentioned in factors of production-(Editor of
Economic Affairs, 2012)[41]. As Economists and businessmen in Bahrain noted, the demand
for commercial offices and lands is offset by a shortage in the supply of commercial lands
units (Al-Wasat, 2006) [47]. Therefore, economic decision should be made by the investors
who would like to establish or expand their business in mobile retail industry in Bahrain due
to the limitation in resources needed such as commercial lands.
Page 20 of 40
8.0-Opportunity cost
Sacrificing the next best alternative choice in order to choose the first option is called the
opportunity cost (Bahrain Polytechnic, 2012)
[48]
. For instance, if Al-Hoot has a limited
amount of budget of BD30,000, then he must be careful of how much to buy/supply using
that budget efficiently and make the right choices in order to get the best outcomes/profit.
With the knowledge of the increasing demand on smart phones in the market, Al-Hoot
chooses two products to sell (iPhone5 and/or Samsung Galaxy SIII). If buying/supplying
iPhone5 was chosen, then the opportunity cost of supplying iPhone5 is sacrificing to supply
some/all the Samsung Galaxy SIII phones and vice versa. This example is clearer when the
production possibility frontier is involved.
8.1-Production possibility frontier-(PPF)

The PPF is A curve showing the maximum attainable combinations of two products that
may be produced with available resources and current technology-(Bahrain Polytechnic,
2012)[48].
Page 21 of 40
Figure 17: The Production Possibility Curve for Al-Hoots shop between iphone5
and Samsung Galaxy SIII.
Point A on the graph means that Al-Hoot decides to sell 46 units of iPhone5 and 48 units of
Samsung Galaxy-SIII. The opportunity cost of moving from point A to B (supplying 12 more units
of Samsung Galaxy SIII) is sacrificing 8 units of iPhone5. The same occurs when it was decided to
increase its iPhone5 supply by 38 units; the opportunity cost of that is 61 units of Samsung
Galaxy SIII (point D to B). Point E means that Al-Hoot is not using its budget efficiently, and point
F means that the retailer cannot reach it with its current resources.
Page 22 of 40
9.0-Good type
Inferior goods
These are the goods that the rise in the level of income results in a fall in the demand of the
good (Pettinger, 2011)[49]. An example of an inferior good in Bahrain is Nokia phones. The
increase in the income level has resulted in increasing the purchasing power of Bahrainis.
Therefore, Bahrainis are able to afford more expensive, higher technology phone rather than
Nokia (Al-Wasat, 2011)-[23]. However, that leaves as with a conclusion that Bahrainis with
lower income buy Nokia phones.
Normal goods
These are the goods that an increase in the income level results in an increase in demand of
them (Pettinger, 2011)
[49]
. An example of normal good is smartphones including iPhone
Blackberry and Samsung. At the level of income increased in Bahrain, the demand for these
smart phones increased as well (Al-Wasat, 2011) [23].
Substitution good
These are the goods that have alternatives to be used for the same purpose (Pettinger,
2011) [49]. For instance, iPhone 5 and Galaxy Samsung S3 are substitution goods. Due to the
high price of iPhone and the similarities between iPhone and Samsung S3, many customers
substituted iPhone 5 for Samsung S3[50].
Complementary Goods
These are the goods that are used together, one product is usually necessary for the other.
For example, mobile phones and the credit cards are complementary goods as the credit is
necessary to make calls (Pettinger, 2011)[49]. Another example is SIM cards and mobiles,
since the mobile is worthless without the SIM card.
Page 23 of 40
10.0 Price discrimination

Price discrimination is charging different prices to different groups of consumers for the
same service or product (Price discrimination, n.d) [51].
Many shops in mobile retail industry use price discrimination as they helpful to attract
customers. For example, Home Electronics offers installment in payment for low income
customer. However, the rest of costumers dont get this offer. Therefore, this is considered
as price discrimination because this offer benefits a segmented group only (Home
Electronics, n.d) [52].
Page 24 of 40
10.0-Price Elasticity of Demand

10.1-Price Elasticity of Demand
This concept examines the ability of the demand for a product or service to response to the
change in the price. Generally, the demand increases when the price decreases, vice versa
(elasticity of demand, n.d) [53].
According to polytechnic 2012, the price elasticity of demand is classified into 3-major
groups:
10.2-Price elasticity of demand for Samsung-Galaxy-S3

According to 7phone, a mobile retail shop in Bahrain, the following table represents the
sales of Samsung Galaxy S3 during August and September:
Figure 18: The Change in the price and the quantity demand of Samsung Galaxy SIII between August
and September in. 7Phone shop
Page 25 of 40

Based on the previous table, the price elasticity of Samsung s3 in 7Phone is calculated as
the following:
Percentage change in quantity demanded= ((Q2-Q1)\Q1)*100
= ((50-35)\35))*100
= 42.9%
Percentage change in price= ((P2-P1)\P1)*100
= ((235-250)\250)*100
=6%
Price elasticity for iPhone= 42.9\6
= 7.15%
The figure is greater than-1; therefore, the demand for Samsung Galaxy-S3 is price elastic.
The change in price has really affected the quantity demand. To illustrate, 6% decrease in
price has resulted in 42.9% increase in quantity.
Page 26 of 40
11.0Macroeconomics
Macroeconomics is the study of the economys choices as a whole rather than the
individuals. It focuses on problems like the GDP, unemployment and inflation
(Macroeconomics, n.d). [55]
11.1-GDP
GDP is the total value of all final goods and services produced in an economy in a year which
determines the economys growth and is equal to (GDP, n.d) [56]:
GDP= Consumption+ Investment+ Government Expenditure+ (Exports-Imports)
As a result of the increase in all of these elements, GDP increases.
Page 27 of 40
11.2-Aggregate demand
Aggregate demand is The total amount of goods and services demanded in the economy at
a given overall price level and in a given time period (Aggregate demand, n.d)[62]. Since the
number of mobile phone subscribers increased (because of the increase in income and
consumption) the GDP increased and move the aggregate demand curve to the right leading
the economy to expand.
Figure 19: the aggregate Demand Curve in case of increasing Consumption
Page 28 of 40
11.3-Circular flow of income

The Circular flow of income is a description of the flow of money, good and services and
factors of production between households and firms (Riley, 2011). [63]
Figure 20: the circular flow of income
The increase in households income by BD1000, the decrease in the unemployment rates
which means that households consume even more, leads to the retailers using these
revenues to pay the wholesaler/firm who provided them with mobile phones to sell to the
public. After that, the firm/wholesaler uses a portion of the revenues to pay their employees
who work for them (which in turn results in more income for the households, more
consumptionand so on), and another portion to save in the bank. The bank invests in these
revenues and gives loans to investors and take interests on them and the government
imposes taxes on these banks. Therefore, government will spend more money on providing
services such as education and health centers that will refer back to citizens (households).
Page 29 of 40
12.0-Conclusion
In conclusion, this report has examined the mobile retail shops industry in Bahrain
by discussing and applying some concepts in regard to micro and macroeconomic.
In light of that, economic concepts were applied on the mobile retail shops industry
which aided to understand the different situations that the industry might face and their
possible reactions. Furthermore, supply and demand are the most significant concepts
related to the industry and they include many factors that might increase or decrease the
demand or supply which shifts the curve to right or to the left.
Likewise, market structure has its powerful effect over the industry. Additionally,
this industry was found to be price discriminated and price elastic which are two significant
elements that can impact decision making in relate to the industry.
Nonetheless, the other microeconomic concepts are also fundamental to this
industry for the reason that the research and analysis evinced these concepts. These other
concepts are: good type, factors of production along with opportunity cost, scarcity and
positive and normative analysis.
Finally, Macroeconomics concepts are also vital to the industry. It shows how the
GDP influences the aggregate demand which, eventually, impacts the circle flow of income.
Page 30 of 40
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Page 32 of 40
http://www.luluhypermarket.com/_index.php
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30
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31
Filoosy, (n.d). Galaxy Note. Retrieved from
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36
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Riley, G. (2012, September 23). Positive and normative Statements. Retrieved from
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38
Seef Mall, (n.d). Electronics/Mobile Shops. Retrieved from

http://www.seef.net/Seef_Mall_Shops_Directory.html?store_category_id=13
39
kovach, S. (2011, February 23). 7 reasons why you should buy an iphone instead of an
android phone. Retrieved from http://www.businessinsider.com/why-you-should-buyan-iphone-instead-of-an-android-phone-2011-2?op=1
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46
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the market system [Powerpoint Slides]. Isa Town, Bahrain: Bahrain Polytechnic.
49
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50
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52
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53
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Page 35 of 40
14.0 Appendices
Appendix 1: The Price of Samsung Galaxy

SIII in Geant Hypermarket.
Appendix 2: The price of Samsung

Galaxy SIII in 7phone.
Page 36 of 40
Appendix 3: Iphone5 Price in GSF Hypermarket between 1st and 10th

of December.
Page 37 of 40
2.81
1.39
1.34
1.29
1.24
2009
2010
1.45
2006
2008
1.51
2005
2007
1.61
1.56
2004
1.67
2002
2003
1.73
1.5
2001
1.78
2.5
2000
The Growth Rate of

Bahrain Population
(%)
0.5
0
2011
The Growth Rate of Bahrain Population (%)
The Growth Rate of Bahrain Population

between (2000 - 2011)
Source: BEDB, 2012
Appendix 4: The Growth rate of Bahrain Population between (2000-2011).
Average and Median Monthly

Wage of Privately Employed
Bahrainis
600
542
500
414
400
BD
319
Average of Monthly Wage
300
214
Median Monthly Wage
200
100
0
2003
2009
Source: BEDB, 2012
Appendix 5: the Average and Median Monthly wage of Privately Employed

Bahrainis
Page 38 of 40
Appendix 6: The Price of Galaxy Note II in GSF Hypermarket between 1st and 10th
of December 2012.
Appendix 7: a comparison between the packages offered by Batelco, Zain and Viva with Galaxy Note I.
Page 39 of 40
Appendix 8: Mobile shops Names in Seef Mall.
Appendix 9: Number of Mobile Subscribers in Bahrain between (2002 and 2010).
Page 40 of 40

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Mobile Retail Shop Industry

Introduction to Economics-BSB 5007

Mobile retail shops industry.Assessment1- Group Report

Mobile retail shops industry.Assessment1- Group Report

. Samsung, Apple and

Mobile retail shops industry.Assessment1- Group Report

Figure 1: Types of Market Structure

2.1-No barriers to exit or entry the market

Mobile retail shops industry.Assessment1- Group Report

. Moreover, Bahrain telecommunication

2.5-Buyers and sellers are price takers

. The prices of the

Mobile retail shops industry.Assessment1- Group Report

Demand and Supply

increases, quantity demanded for

Figure 2: Reducing the price of iphone5 in GSF Hypermarket.

used to represent this negative

Mobile retail shops industry.Assessment1- Group Report

Figure 3: The Demand curve of IPhones in USA in 2008

3.2 Demand Curve Shift

Mobile retail shops industry.Assessment1- Group Report

Mobile Subscribers in Bahrain

The Growth in the Number of Mobile Subscribers in Bahrain

Figure 6: The growth in mobile subscribers in Bahrain between (2002 2011).

Mobile retail shops industry.Assessment1- Group Report

Blackberry Subscribers (Thousands)

Mobile retail shops industry.Assessment1- Group Report

Figure 7: The Demand Curve for Blackberries.

The Growth in Blackberry

Source: TRA, 2012

Figure 8: The Growth in Blackberry subscribers from 2009 to

Mobile retail shops industry.Assessment1- Group Report

. However, Lulu Hypermarket sells the same mobile for 269.900BD

Mobile retail shops industry.Assessment1- Group Report

Figure 9: The Demand Curve for SIM Cards.

Figure 10: the demand Curve for mobiles in 2009

Mobile retail shops industry.Assessment1- Group Report

Mobile retail shops industry.Assessment1- Group Report

Figure 11: Decrease in supply of iphone5 in Sharaf DG because of

4.2 Shift factors of the supply curve

Mobile retail shops industry.Assessment1- Group Report

Figure 12: The supply Curve in case of reducing the price of

Number of firms in the market

Figure 13: the supply curve when number of mobile

Mobile retail shops industry.Assessment1- Group Report

Subsidies and taxes

Bahrain is focusing on creating job

subsidies and introducing taxation subsidies on the supply curve

In case of employees wages

Polytechnic, 2012)[21]. In spite of

increased from BD440 in the Q4 of

Figure 15: The impact of increasing wages on the supply curve

Mobile retail shops industry.Assessment1- Group Report

5.0 Positive and Normative analysis

. As this is completely dependent on Kovachs opinion, it is considered as

Mobile retail shops industry.Assessment1- Group Report

. Hassan Kamal, the Chairman of the

Mobile retail shops industry.Assessment1- Group Report

Figure 16: The usage of different resources by viva in term of Entrepreneurship.

Mobile retail shops industry.Assessment1- Group Report

Mobile retail shops industry.Assessment1- Group Report

. For instance, if Al-Hoot has a limited

8.1-Production possibility frontier-(PPF)