Hisam - AAGSB - Managerial Economics Final Exam - Group Code - March2022

Name: Hisham
Group Lecture Day: Tuesday
Course: Managerial Economics
Group Code:
Date of submission:
Question 1:
1. Read the following statement and answer the question that follows. "Cell phones
have quickly become taken as much for granted as electricity or water supply. They have
had a major impact on our lives and the way that we perform everyday tasks. Many of
these changes are apparent, while others we may not even be aware of. People
nowadays really don’t remember quite well how life was before cell phones existed!"
Use the demand-supply model to illustrate the changes in the market for cell phones
over the last twenty years. Try as much as possible to relate the demand-side factors
and the supply-side factors we studied in class to the market under study. Although
drawing graphs is not necessarily required, yet it could help you to illustrate your
answer. Support your answer with relevant real-life data.
Solution of Question 1:
The Cellphone Revolution and Digital Inequality: Scope, Determinants and
Consequences
In the 21st century, the digital economy is one of the most important drivers of global
economic growth and innovation. Infrastructure, hardware and software that enable the
rapid transmission of large amounts of information between people
Digital technologies have transformed the global economy. By one estimate, digital
technology – infrastructure, hardware and software that enable the rapid transmission
of large amounts of information between people, businesses, devices, networks and
systems – contributes US$3 trillion [£2.3 trillion] to the global economy.¹ The rise of the
global digital economy has been fast and furious over the span of three decades.
Integral to its penetration of low-income countries has been the mobile phone
revolution.
Mobile technology and wireless networks have enabled businesses and consumers in
emerging markets to leapfrog underdeveloped fixed-line infrastructure and limited
computer access to connect digitally. This has been a boon for billions of end-users, as
the mobile phone has become the most accessible, ubiquitous and functional
information and communication technology (ICT) in history.
However, even as handset and mobile costs have dropped precipitously, this gateway to
the digital economy remains closed to many.
Mobile technology as a gateway to the digital economy

The last half-century has witnessed the consolidation of the digital economy. At the
heart of this technological revolution has been the development of infrastructure,
hardware, software and networks. This has reduced the cost of storing and transmitting
large volumes of information and has facilitated and intensified online connectivity
between individuals, organisations and systems all over the world.⁴ The digital
technological revolution was initially centred in the US and Europe, where the two most
important innovations driving the transformation to a digital economy –
microprocessors and the internet – were invented. The spread to emerging markets was
slowed by state-owned telecommunications monopolies, underdeveloped fixed-line
telecom infrastructure (the backbone of initial internet connections) and the high costs
of the first generations of computers.
The impact of the mobile digital economy on economic growth at the household and
nationallevel has been tremendous. Consider China, the world’s leader in digital
payments. In the span of two decades, the contribution the digital economy makes to
gross domestic product (GDP) has gone from virtually zero to an estimated 30% in 2016.
Mobile phone ownership
One of the most important determinants of SIM use is mobile phone ownership. While
in theory a SIM card alone unlocks mobile communications and value-added services,
opening the door to digital inclusion, the reality is far different. Not possessing one’s
own phone represents a significant barrier to use.²⁹ It restricts when and how much
individuals can use a phone, as non-owners are dependent on others making their
phones available. It compromises privacy, as non-owners often have to use the phone in
front of those they borrow it from. It leaves borrowers vulnerable to phone
gatekeepers, who may mediate information access,³⁰ and also leverage information
asymmetries to exploit the non-owners
Supply-side factors of mobile access and use
In assessing the sources of digital inequality, it is useful to consider the drivers of

demand and supply in mobile phone adoption and use. Demand drivers shape an
individual’s willingness and ability to own a mobile phone and consume value-added
services. In turn, supply factors shape the availability and accessibility of mobile
products. This section begins by discussing key supply-side factors.
Regulatory supply & demand factors
A second important supply factor is infrastructure. At the most basic level, mobile
phone access is directly tied to the diffusion of cell towers. Their initial rollout generally
followed traditional communication and transportation infrastructure⁶¹ – targeting the
most densely populated areas first. As access improved, uptake followed.⁶² But the low
fixed costs for mobile technology to supply a given area with cell service has enabled it
to leapfrog older ICTs and to reach a much wider set of end users, especially in countries
with sparse infrastructure networks.
Demand-side factors of mobile access and use
On the demand side, one of the most powerful sources of digital inclusion is individuals’
disposable income to buy a phone and consume value-added services. Preferences,
tastes and other cognitive considerations are also important and require further
discussion.
The primacy of disposable income
As noted, the costs of mobile handsets and service have dropped dramatically over the
past two decades. This has exponentially increased ownership and access. But costs still
represent a formidable barrier for many. Income constraints affect demand on every
branch of the mobile digital economy: buying a handset; using a handset and value-
added services, especially mobile money; smartphone migration; and internet use.
Across multiple surveys in low- and medium-income countries, lack of disposable
income is reported as the dominant factor constraining mobile phone use. For example,
in accounting for the gender gap in phone ownership, the Connected Women
programme found that cost is the primary reason women report not owning a phone;
this factor largely trumps other potential barriers, such as perceived value of phone use,
family constraints, agent trust and access, and technical literacy.⁹¹ Similarly in the FII
surveys, most respondents (men and women) report that – more than any other factor
– the high prices of smartphones keep them out of reach
Gender
Early research on the digital divide along gender lines attributed it to economic
inequality, such
as women’s lower levels of employment, education and income
Age
A fourth important social determinant of digital inequality is age. Across most countries
in the world, smartphone and internet use is significantly lower among older
generations
One significant constraint in access and usage is the degree of turnover in SIM
registration and handset ownership. Large tracking surveys have done a great service in
exposing the large and important gaps in ownership, but, as they generally only provide
a static, discrete picture of phone ownership and use, they have failed to spotlight the
problem of turnover. This phenomenon points to the importance of more rigorous and
dynamic methodologies in tracking the pathway from mobile phone access to
ownership to usage – an important policy implication itself.
The socio-economic determinants of mobile phone ownership
The socio-economic determinants of mobile internet profi ciency

References
Aker, JC and Mbiti, IM. ‘Mobile phones and economic development in Africa’. Journal of
Economic Perspectives 24, no. 3: 207-32, 2010.
Armanasco, A et al. ‘Preventive health behavior change text message interventions: A
meta-analysis’. American Journal of Preventive Medicine 52, no. 3 (2017): 391-402.
Barboni, G. et al. A tough call: Understanding barriers to and impacts of women’s mobile
phone adoption in India, Harvard Kennedy School, Evidence for Policy Design, October
2018.
Buys, P et al. ‘Determinants of a digital divide in Sub-Saharan Africa: A spatial
econometric analysis of cell phone coverage’. World Development 37(9), 1494-1505,
2009.
Cole-Lewis, H and Kershaw, T. ‘Text messaging as a tool for behavior change in disease
prevention and management’. Epidemiologic Reviews 32, no. 1: 56-69, 2010.
Croxson, H and Rowntree, O. Triggering Mobile Internet Use Among Men and Women
in South

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Name: Hisham

Group Lecture Day: Tuesday

Course: Managerial Economics

Mobile technology as a gateway to the digital economy

Mobile phone ownership

Supply-side factors of mobile access and use

In assessing the sources of digital inequality, it is useful to consider the drivers of

Demand-side factors of mobile access and use

The primacy of disposable income

The socio-economic determinants of mobile phone ownership

The socio-economic determinants of mobile internet profi ciency

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