jacie's short response (week 1)

When something gets cheaper, we often take it for granted that the people will buy more or more will be sold. Often times it seems to be the case, but the three chapters illustrate that there are indeed more economic principles behind such a general statement. Even though demand and supply interact with each other in a market and the combination of the two determine the market price, here I find demand to be really interesting since I am interested in audience/users more than media firms.

From the chapters we learned that there is “change in quantity demand” and “change in demand.” Change in quantity demand is affected by the own price of the product while change in demand is affected by other external factors other than the product’s own price (such as change in income per capita). When the authors explain Law of Demand, they also use empirical examples of how often firms ignore Law of Demand, purposefully or not (p.20).

One thing that came to mind was iPhone (bear with me if you hear this word often enough already). iPhone came out in the summer of 2007 and the latest iPhone 3G was launched on July 11th this summer. One significant difference, in term of economics, is there was a significant decrease in the product’s own price: it dropped from $399 to $199 (for 8G storage space model). After the “better and cheaper” 3G iPhone was launched on July 11th, Apple’s press release on July 14th quoted the CEO Steve Jobs saying, “iPhone 3G had a stunning opening weekend. It took 74 days to sell the first one million original iPhones [in 2006], so the new iPhone 3G is clearly off to a great start around the world.” The comparison here is: a million iPhones, 74 days v.s. 3 days.

Demand of iPhone 3G seems to be much higher, but in what way? Is it merely because it is $200 cheaper? In addition to change in quantity demand (affected by the product’s own price), five factors might cause change in demand: price of a demand-related product, income per capita, number of potential buyers, expectations regarding future price, and tastes. The factor that stands out here in the iPhone case is the number of potential buyers. As the original iPhone was only sold in the United States, the new 3G iPhone is available in 21 countries in the world. As in chapter 3 it says that “the population served by a market is a good indicator of the number of potential buyers,” the greater the population in a market, the greater the demand. When Apple made iPhone available in 21 countries, the market is expanded and the demand is higher, other things being equal. It is not the new iPhone is more popular or merely because it is cheaper, but also because the market is now bigger thus the demand is higher.

I think having an understanding in media economics gives us a great tool to explain and predict social phenomena, as well as seeing through the basic principles of these phenomena. I also think the principles of demand and supply can be applied to users’ news demand, but it is still very vague for me at this point since I feel news products are close substitutes to each other.



As for the three tech sites, I do visit the tech section of major news sites often, including NY Times, Washington Post, CNET, etc. Let me include these three here: digg.com's tech section, Search Engine Watch (cause I like google), and Techdirt.