BSB 5007 Introduction to Economics
Assessment 1
Case study: the Bahraini mobile
retailing industry
Done by: Ali sarhan
ID: 201101119
Class: W01
Group: 01
Word count: 4379
Tutor: Eman asker
Page 0 of 37
Contents
1.0-Introduction ...........................................................................................................2
2.0-Microeconomic Concepts ........................................................................................3
2.1-Scarcity ..............................................................................................................3
2.2-Factors of Productions .........................................................................................3
2.3-Positive VS. Normative analysis ............................................................................5
2.4-Opportunity cost .................................................................................................5
2.4.1-Production-possibility curve(P.P.C). ................................................................6
2.5-Demand .............................................................................................................7
2.7.1-Demand-Shifting factors ................................................................................8
2.6.2-Demand Movement Factors......................................................................... 13
2.6-Supply .............................................................................................................. 13
2.6.1-Supply-shifiting factors ................................................................................ 14
2.6.2-supply-Movement Factors ........................................................................... 17
2.6.4-Equilibrium ................................................................................................ 18
2.8-Market structure............................................................................................... 21
2.9-Good-types....................................................................................................... 23
2.10-price elasticity of demand ................................................................................ 25
2.11-Price discrimination: ........................................................................................ 27
3.0. Macroeconomic Concept ...................................................................................... 27
3.1-The aggregate demand ...................................................................................... 28
3.1.1-Consumption .............................................................................................. 28
3.1.2-Investment................................................................................................. 29
3.2.3-The Net Exports .......................................................................................... 30
3.1.4-Government spending ................................................................................. 30
3.1.5-The circle of flow ........................................................................................ 30
3.1.6-The Aggergate-demand Curve ...................................................................... 29
3.2-Unempolyment................................................................................................. 29
4.0-Conclusion ........................................................................................................... 31
5.0-Appendices .......................................................................................................... 33
Appendix (1):mobile phone penetration ................................................................... 33
Appendix (2): Bahrain employment rate ................................................................... 33
Page 1 of 37
1.0-Introduction
The aim of this report is to create a cohesive understanding of the Bahraini mobile-retailing
industry by applying different economic concepts, both from microeconomics point of view.
Various data has been collected from articles, websites, financial reports as well as interviews
with mobile-shop owners.
The mobile retail is an industry that keeps growing and developing constantly. It can be
thanked for the success of another industry in Bahrain, the telecommunication-industry;
because the more profitable part in that industry in mobile-services, and simply without
mobile-retailing there is no mobile-services1. Recently, this industry has been increasing with
increase of population.(Appendix-1)
Smartphones represent 5.1% of total annual retail-shops sales in Bahrain, estimated by to
$159 billion in 2012. Research also forecasts this number to raise to 19% estimated by $689
billion by 20162. There are many mobile-retailers like: Batelco, Zain and VIVA3. As well as many
Mobile retailing shops in famous commercial streets such as Exhibition-road, and malls such
as Gossi mall, that specialize in selling mobiles. Because of all the above, the mobile-retailing
industry does has a notable effect on Bahrain’s economy.
1BMI.
(2012). Bahrain Telecommunication report. Retrieved from
http://search.proquest.com/docview/917807356/1359F86C8A027A966EB/1?accountid=62741
2
Rafique, M.(2012) Smartphones will create $689b in retail stores by 2016. Retrieved
fromhttp://www.twentyfoursevennews.com/bahrain-telecom/smartphones-will-create-689b-inretail-stores-by-2016/
3
Alpen Capital.(2011). GCC Retail Industry. Retrieved from
http://www.alpencapital.com/downloads/GCC%20Retail%20Industry%20Report%202011_1%20Nove
mber%202011.pdf
Page 2 of 37
2.0-Microeconomic Concepts
The following are 10 microeconomics elements that study the effect of choices made
by individuals and firms within the Bahraini mobile-retailing industry:
2.1-Scarcity
A situation where people must make choices between different items because the resources
necessary to fulfill their wants are limited.4 Commercial lands are shared between all Bahraini
industries. Meaning, The need for commercial lands in Bahrain exceeds the number of
existent lands Thus, there is a land scarcity5 where mobile-retailers will not be always able to
open new shops due to lack of one a production-factor (land).
2.2-Factors of Productions
Inputs that are necessary in creating outputs for a business.6Below are the needed production
factors in the mobile-retailing industry. Examples about the Bahraini mobile-retailing shops
were taken from an interview with Hassan Al-Aali, owner of a medium-sized mobile-shop,
infoland-plus7.

Natural resources :
They are the resources that exist in nature and are necessary to produce. For a mobileretail shop, the most important natural resource is land as it is important to establish
the shop or for warehousing. Gas for cars usage, for transportation. Moreover,
electricity is needed to use the shop’s equipment. 8

Labors:
The human efforts in the production cycle9. labor gain salaries in exchange of this
effort. Medium-sized mobile-shop requires at least three workers in order to import
phones: salesperson, solve customers’ problems and over all run the shop. Bahrain
has a big rate of employment that can cover the need for this factor(appendix-2).
4
Scarcity.(n.d).Retrieved from: http://www.investopedia.com/terms/s/scarcity.asp
of Municipalities Affairs and Urban Planning.(2012). Retrieved from
http://websrv.municipality.gov.bh/mun/index_ar.jsp
6
Solow R.(n.d.). factors of production. Retrieved from: http://tutor2u.net/economics/content/topics/introduction
5Ministry
7
AL-Ali, H.(2012). infoland-plus. Interviewed by Ali sarhan [in person] infoland-plus shop.
8Wicks,D.(n.d).
Factors of Production for Retail Stores?. Retrieved from http://www.ehow.com/info_8796043_factorsproduction-retail-store.html
9
Solow R.(n.d.). factors of production. Retrieved from: http://tutor2u.net/economics/content/topics/introduction
Page 3 of 37

Human-capital
This refers to the skills of the labor force10. Shops in this industry needs labor
with multiple-skills like: sales, technological, problem-solving and customersservice skills. Moreover, labor can be divided into three groups based on skills:
skilled, semi-skilled or unskilled labor. Usually small mobile-shops hire
unskilled and semi-skilled labor while big mobile-retailers use mostly skilled
employee.

Physical-Capital
The finance needed to establish the mobile-retailing shop. The capital here
includes things such as building, land, employees' salaries and necessary
equipment.11 Medium-sized mobile-shop usually needs minimum BHD60,000
as capital. The bigger the shop the larger the capital required. Capital can be
provided by borrowing from banks; which can be done from any of the 407
banks in Bahrain.12

Entrepreneurship
The entrepreneur is an innovative person who manages the factors of
production, and takes risks to differentiate his business from others to make
it successful13. Hasan-Alali is an entrepreneur as he manages the productionfactors in his shop, infoland-plus. He is innovative risk-taker; as he introduce
the idea of home-delivery for phones from the shop to the consumers without
consumers doing any effort. These ideas differentiated his shop from other
shops and made it successful14.
10Wicks,
D. (n.d). What Are the Factors of Production for a Retail Store?. Retrieved from
http://www.ehow.com/info_8796043_factors-production-retail-store.html
11
Solow, R. (n.d.). factors of production . Retrieved from http://tutor2u.net/economics/content/topics/introduction
12CCB.(2012).factsheet. Retrieved from from http://www.cbb.gov.bh/page-p-cbb_register.htm
13Solow, R. (n.d.). factors of production . Retrieved from http://tutor2u.net/economics/content/topics/introduction
14
Hassan-Alali.(2012). Interviewed by: Ali-sarhan. Infoland-plus shop.
Page 4 of 37
2.3-Positive VS. Normative analysis

Positive Analysis
It is a factual analysis. The analysis of ‘what is’ that is useful to detriment the
market’s characteristics. It can be tested on a subject to prove or disprove it without
any personal judgments15. The followings are positive-statements from the Bahraini
mobile-retailing industry.
 There were 1.694mn mobile users in Bahrain at the end of 2011, up by
8% the end of 2010 and the number is expected to grow to 1,725mn by
the end of 2012.16
 The mobile-industry contributes with 44% of the telecommunicationindustry, which is one of the biggest Bahraini industries17.

Normative Analysis
It is an opinion-based analysis. It is the answer to ‘what should be’. This kind of
analysis could not be proven or disproven.18 This analysis includes giving opinion on
prices or quality and is useful to detriment consumers’ preferences.
 When mobile retailers wondering: “what phones should we provide?” a
normative analysis to detriment the consumers taste.
 Consumers may buy phones just because of what they think is the best, like
buying IPhone5 because they think apple products are the best.
2.4-Opportunity cost
It is the price of the next best alternative that must be sacrificed in order to make a decision.19
For example:

If infoland-plus, a mobile-retailer, decided to supply IPhone5 (BHD280) instead of
supplying Samsung-galaxyS3(207BHD).20 infoland will be sacrificing the
customers that could have been attracted to Samsung-galaxyS3 due to its lower
prices as well as 37BHD/IPhone5 supplied.
15Ingrimyne.(n.d).Normative
and Positive analysis. Retrieved from:http://ingrimayne.com/econ/Introduction/Normativ.html
BMI. (2012). Bahrain Telecommunication report. Retrieved from
http://search.proquest.com/docview/917807356/1359F86C8A027A966EB/1?accountid=62741
17
TRA.(2011).Telecommunication indicators in the kingdom of Bahrain.Retrieved from
http://tra.org.bh/en/pdf/2011TelecommunicationsMarketsIndicators-ForPublic.pdf
18 Ingrimyne.(n.d).Normative and Positive analysis.Retrieved from:http://ingrimayne.com/econ/Introduction/Normativ.html
19Economic Wisconsin.(n.d).Retrieved from: http://www.economicswisconsin.org/guide/glossary.htm
20
AL-Ali, H. (2012) infoland-plus. Interviewed by Ali sarhan [in person] infoland-plus shop.12thDecember
16
Page 5 of 37
Moreover, Batelco, a mobile-retailer recently has opened a branch in Sitra mall21. Thus,
Batelco sacrificed the chances of selling more in other places. Also, Batelco is sacrificing
cheaper rent in other places, since their location is in a mall which has a high rent. Batelco is
also sacrificing the opportunity to invest their time and money in developing their otherbranches.
2.4.1-Production-possibility curve(P.P.C).
A curve that demonstrates the maximum achievable combination of two products that can be
produced with similar resources and technology22. The following is Phone-land, a mobileretailing shop, P.P.C of supplying Samsung-GalaxyS3 (supply-price: BHD 207) and SamsungGalaxy-note2 (supply-price: 215BHD) 23, with an assumed budget of 20,000BHD.
In Point A, phone-land can imports 96 of GalaxyS3, by sacrificing the opportunity to import
the note2. In Point B, they can import 18 of note2 and 77 of S3. Phone-land can import 48 of
S3 and 47 of note 2 at point C. lastly; point D shows phone-land ability to supply 93 note2 by
sacrificing supplying all units of S3.
21Batelco
opens retail shop in sitra mall.(n.d.).Retrieved
from:http://www.batelco.com/batelco_cms/NewsStory.aspx?nid=552
22Investopedia.(n.d).Opportunity Cost. Retrieved from
http://www.investopedia.com/terms/o/opportunitycost.asp#axzz2F6XKAiDN
23Mohamed, H. (2012) Phone-land. Interviewed by Ali sarhan [in person].Phone-land shop.
Page 6 of 37
the curve can be used to understand the opportunity-cost for each choice. For phone-land to
move from a choice to another, a sacrifice must be made. To move from point A to be they
must sacrifice supplying 9 S2 for example. The owner said both phones are popular with his
customers, so point C(supplying 50% of both phone) seems the best choice.
2.5-Demand
Total quantity of products that consumers have the willingness and ability to buy, when the
price increases, the quantity-demanded decrease and vice versa.24
24Investopedia.(n.d).Law
of demand. Retrieved from http://www.investopedia.com/terms/l/lawofdemand.asp
Page 7 of 37
2.7.1-Demand-Shifting factors
The curve can be shifted right and left by non-price affecting factors. For example:25
25Demand
Shifting-Factors.(n.d).Retrived from: http://www.netmba.com/econ/micro/demand/curve
Page 8 of 37
Explanation
Example
Income level
The minimum wages has risen to BHD400 26Resulting in people
When the income rises; people buy more of normal
buying less of inferior(older) phones like nokiaX1-01(BHD1527)
goods(demand-curve shift to the right) and less of
and more of normal(newer) phones like nokiaN701(BHD11928)
inferior goods(shift to the left) and vice-versa.
from SharafDG
Price Of related Products: Substitute
If the price of one product increased or was higher than IPhone 5 (450BHD)29 and the samsung GalaxyS3(212BHD)30 are
the other, the demand on its substitute will increase considerd to be a subsitutes to each other. Since the IPhone5 is
and vice versa.
more expensive, the demand on samsung increased31
26Hanratty,
T.(2011.). Retrieved from:http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=313844
from: http://www.sharafdg.com/Products/Sharaf-DG-Telecom-Mobiles-Mobile-Phones/Nokia/Nokia-X1-01-MobilePhone-Ocean-Blue-AFC/pid-206444.aspx?Rfs=&pgctl=42093&cid=CK00001449
28SharafDG.(2012). NokiaN701Retrieved from http://www.sharafdg.com/Products/Sharaf-DG-Telecom-Mobiles-Smart-Phones/Nokia/NokiaN701-Smartphone-Dark-Steel-AFC/pid-206491.aspx?Rfs=&pgctl=42093&cid=CK00001449
27SharafDG.(2012).Retrieved
29Alwasti,
h.(n.d). Retrieved from http://www.alwasatnews.com/3673/news/read/704654/1.html
30El7araj.
(n.d.). Samsung GALAXY SIII .Retrieved from http://el7araj.com/Samsung-GALAXY-S-3
31
Alwasti, h.(n.d). Retrieved from http://www.alwasatnews.com/3673/news/read/704654/1.html
Page 9 of 37
Price of related products: complementary
Two products that are commonly used together. If the Because of the huge demand on the Samsung-GalaxyS3(BHD
demand on one increase, so does the demand on the 210) in phone-land32, a Bahraini-mobile retailer. The demand
other.
on Batelco’s macro-Simcard(2BHD33) will increase.
Consumers’ preference
32Mohamed,
H. (2012) Phone-land. Interviewed by Ali sarhan [in person].Phone-land shop.
Batelco. (2010). Batelco introduces the MicroSim. Retrieved from
http://www.batelco.com/batelco_cms/NewsStory.aspx?nid=475
33
Page 10 of 37
VIVA has Postpaid package for IPhone4S (468BHD34), which will
Consumers’ tastes can be affected by external -factors
increase VIVA‘s demand on IPhone4S and decrease it in
that make them want to buy more(shift to the right) or
package-less shop like SharfDG (246BHD35); because people
less(shift to the left) of a product.
prefer packages.
Consumers’ expectations
Info-land demand on SamsungS1(130BHD in2011) decreased
Consumers will buy more of a product when as the IPhone4S was rumored to launch soon shortly
they expect its price to rise in the current time afterwards. Consequently, consumers waited as they expected
and less in the future and vice-versa.
the S1’ price to decrease after the 4S release36 ; thus shifting
the demand-curve lefty before 4S release.
34
VIVA IPhone4S.(2012). Retrieved from http://www.viva.com.bh/content/iphone-4s
SahrafDG IPhone4S(2012). Retrieved from http://www.sharafdg.com/Products/Sharaf-DG-Telecom-MobilesSmart-Phones/APPLE/Apple-IPhone-4S-Smartphone-16GB-Black-SMS/pid-206502.aspx
36
AL-Ali, H. (2012) infoland-plus. Interviewed by Ali sarhan [in person] infoland-plus shop.12thDecember
35
Page 11 of 37
Population
Population in Bahrain has been facing an increase since
The more the population in a country is, the more
2009.37 Indicating more potential-demand on phones like
demand on a product is, thus shifting the curve
SharafDG’s
BlackBerry-Curve9360(128BHD38),
thus
rightly, and vice versa
shifting the curve to the right.
37
Indexmundi. (2012).Bahrain demographics. Retrieved from
http://www.indexmundi.com/bahrain/demographics_profile.html
38SharafDG.(2012).BlackBerry-9363.Retrieved from:http://www.sharafdg.com/Products/Sharaf-DG-TelecomMobiles-Smart-Phones/Blackberry/Blackberry-9360-Curve-Smartphone-White-ENGARA--Tablet-Worth-AED-399-Corded-headset/pid-206496.aspx
Page 12 of 37
2.6.2-Demand Movement Factors
The following factors are capable of changing the quantity-demanded by affecting the price
causing a movement along the demand-curve downwards(increase) or
upwardly(decrease):39
Explanation
Example
Product’s price.
Decrease in price results in increasing quantitydemand and vice-versa
In infoland-plus, The price of Iphone4s (BHD500 in
2011) decreased to (BHD260 in 2012) after a year of
its release because of many discounts provided to
attract customers and introduction of newer phones
like IPhone5. Consequently, IPhone4 Quantitydemand increased from 15 to 57 unit40
2.6-Supply
It is the total quantity of products that a business has the willingness and ability to sell. The
law of supply indicates that an increase in prices will increase the quantity-supplied and viceversa41
39Supply
and demand.(n.d).Retrived from: http://www.ssc.wisc.edu/~scholz/Teaching_101/Lecture3.pdf
AL-Ali, H. (2012) infoland-plus. Interviewed by Ali sarhan [in person] infoland-plus shop.12thDecember
41 Supply.(n.d).Retrieved from: http://www.investopedia.com/terms/s/supply.asp
40
Page 13 of 37
2.6.1-Supply-shifiting factors
Supply-curve shifts due to any non-price determinant, such as:42
Explanation
Example
Cost of Production
An increase in the cost of production causes a
decrease in quantity-supplied shifting the
curve to the left and vice-versa.
The rent of the commercial lands in Bahrain has decreased
recently43, which will decrease the total cost in "Deep
Electronics"44, a mobile retailer. Meaning more money will
be available to supply, thus increasing quantity-supplied
from Iphone4s (330BHD).
42Supply
and demand.(n.d).Retrived from: http://www.ssc.wisc.edu/~scholz/Teaching_101/Lecture3.pdf
Almghan,. A. (2012). Low rents in residential and commercial properties. Al Wasat Newspaper. Retrieved from
http://www.alwasatnews.com/3565/news/read/674144/1.html
43
Page 14 of 37
Prices of substitutes in production
If the price of a product is higher than its
substitute the supply of that substitute will
decrease and vise-versa
45
Iphone5 prices are high (450BHD45) comparing to GalaxyS3
(210BHD46), retailers like elharaj will supply more from
Iphone5 in order to benefit from the high price to gain moreprofit and less from the S3. Thus shifting the first’s curve to
the right and the second’s to the left.
Alwasti, h.(n.d). Retrieved from http://www.alwasatnews.com/3673/news/read/704654/1.html
(n.d.). Samsung GALAXY SIII . Retrieved from http://el7araj.com/Samsung-GALAXY-S-3
46El7araj.
Page 15 of 37
Number of Shops
The more branches a supplier has in the
market, the more quantity of goods will be
supplied and vice-versa.
Recently, VIVA opened its 18th retailing-outlet in Bahrain,
each selling Samsung-GalaxyS3 (301BHD47). Therefore, they
will need more of Samsung-GalaxyS3 to cover and sell them
in all of their branches. Thus supply will increase.
Expected future prices
The prices of Samsung galaxyS3 is expected to
If suppliers expected the price of a phone to drop In decrease after the release of the S4. Thus, retailers
the future, they will try to sell and supply more in the will supply more of the S3 to take advantage of its
present to make more profit and vice-versa
current prices.
47
Samsung-galaxyS3.( 2012). Retrieved from: http://www.viva.com.bh/content/samsung-galaxy-s-iii-viva
Page 16 of 37
2.6.2-supply-Movement Factors
Movements along the supply-curve can be caused by changes in the price of the good
itself48.
Explanation
Example
Price of the Good
An increase in the price of good increases the
quantity-supplied produced, creating a
movement upwards on the supply-curve. and
vice-versa
48
Owner of deep electronics said that the prices of
IPhone4 decreased from BHD240 after IPhone4s has
been released to 220BHD so he decreased his
supplies of IPhone4 and increased his supplies on
IPhone4s in order to maximize his profit.49
Supply and demand.(n.d).Retrived from: http://www.ssc.wisc.edu/~scholz/Teaching_101/Lecture3.pdf
S. (2012, November 29). Deep Electronics Store. Personal interview.
49Abdulla.
Page 17 of 37
2.6.4-Equilibrium
The situation where the total quantity-demanded from consumers' equals the total quantitysupplied from sellers50. The Bahraini Mobile-retailing has perfect-competition equilibrium
because it has many buyers and sellers51. A curve to represent the equilibrium can be drawn
using the supply and demand curves.
50Market-Equilibrium.(n.d).Retrieved
from: http://www.investopedia.com/terms/e/equilibrium.asp
from:
http://tutor2u.net/economics/content/topics/competition/competition.htm
51Perfect-Competition.(n.d).Retrieved
Page 18 of 37
2.6.4.1-Shortage
A situation where the Quantity-demanded is more than the quantity-supplied,
like the 2012 shortage of Samsung-GalaxyS3 (BHD 23052) one May,201253.
52Elgadali.(2012).Samsung-galaxyS3.Retrived
from: https://bahrainforums.com/vb/%E5%E6%C7%CA%DD-
%E4%DE%C7%E1%C9/971917.htm
53Waugh,
R. (2012). Samsung . Retrieved from http://www.dailymail.co.uk/sciencetech/article-
2164994/Samsung-runs-Galaxy-S3-phones-huge-demand-Android-handset-causes-million-lost-sales-month.html
Page 19 of 37
2.6.4.2-Surplus
A situation where the Quantity-demanded is less than the quantity-supplied, like the
2012 Surplus of IPhone554.
2.7.4.3-Equilibrium-Shifting factors.
Since the equilibrium-curve is drawn using the demand and supply curves, the
factors that shifts these curves also affect the equilibrium.
 Demand-shifting:
All The factors that shift the Demand curve, which was mentioned above, can shift
the whole equilibrium. Like the effect of (Samsung-galaxyS3) a substitute of IPhone5
effect on the equilibrium.
54
Alwasti, h.(n.d). Retrieved from http://www.alwasatnews.com/3673/news/read/704654/1.html
Page 20 of 37

Supply-Shifting factors
Just like the demand- Shifting factors, the Supply-Shifting factors like the
number of shops in the market will also affect the equilibrium.
2.8-Market structure
In this section, the Bahraini Mobile-retailing market structure is going to be discussed. First,
the table below shows the characteristic of the market.
The table proves that the market is perfect-competition, below are detailed information for
each characteristic:

The number of mobile subscribers in Bahrain was 1,694,000 people in 201155.
Logically, these subscribers need to buy mobile phones to be mobile-subscribers.
Thus, it is safe to estimate that there are currently 1,694,000 mobile-buyers in
Bahrain.

There are many Mobile-retailers(sellers) in Bahrain such as:
55BMI.
(2012). Bahrain Telecommunication report. Retrieved from
http://search.proquest.com/docview/917807356/1359F86C8A027A966EB/1?accountid=62741
Page 21 of 37
 The Most famous retailers; are Batelco56 with 19 outlets that sell mobilephones, Viva57 with 18 and Zain with only 1758.
 Shops scattered across Bahrain, in malls such as Gossi-mall. And commercial
streets like exhibition-route and jid-ali

The participants in this market are price takers, which mean that a single participant
cannot affect the phone-prices and take them as they are given59. meaning that
Mobile-retailers cannot change their prices without affecting their demand
significantly.

Shops provide phones with similar characteristics but from different
brands(homogenous-goods). For examples: all phones need a processor, SIM-card to
function and can be used for entertainment purposes60. These homogenous phones
are alternatives of each other. The most common products are IPhone, BlackBerry,
Samsung, and Nokia phones.

The demand in the Bahraini Mobile-retail is perfectly elastic, which means any
change in price will cause quantity demanded fall to zero and The demand is infinity.
Here, companies have cannot change the prices on their own, they only control the
supplied-quantity61.For example, Elharaj cannot increase their Samsung-galaxyS2
price (159BHD62) without hugely affecting the demand.
56Batelco
About us.(n.d).Retrieved from http://www.batelco.com/portal/pr/about_us.asp
from http://www.viva.com.bh/content/about-us
58Location-finder.(n.d).Retrieved from http://www.bh.zain.com/ZainPortal/Contact_Us.jsp
57Shop-locater.(n.d).Retrieved
59Price
takers. (n.d).Retrieved from http://www.investopedia.com/terms/p/pricetaker.asp
60Common
mobile-characteristics.(n.d)Retrieved from: https://sites.google.com/site/knguyencs73n/thetechnology/common-phone-features
61Elasticy.
(n.d).Retrieved from http://www.tutor2u.net/economics/content/topics/elasticity/elastic.htm
62
El7araj. (n.d.). Samsung GALAXY SII. Retrieved from: http://el7araj.com/Samsung-GALAXY-S-2?filter_name=Samsung
Page 22 of 37

There are not barriers that prevent any new company or customer from entering or
exiting this market. Any customer can enter the market by going to any shop desired.
Furthermore, companies can start or close a mobile-retailing business by simply
importing phones and beginning to sell them after meeting the simple government
requirement. The graph explains companies entry and exist points using the market
equilibrium concept 63
2.9-Good-types
This refer to the 4 categories of goods; normal, inferior, substitute and complementary.

Normal & Inferior
The demand of these types depend heavily on consumers’ income and will change when the
income change with a percentage, thus they have an income-elasticity of demand64.
Types
Explanation
Demand Elasticity
(Income)
Normal
Goods that are new and
bought more with an income
Positive-Elasticity: when the
average income increased to
63Barriers
Examples


Smasung-GalaxyS3
IPhone 4, 4s and 5
to entry. (n.d). Retrieved from http://www.investopedia.com/terms/b/barrierstoentry.asp#axzz2DFbiFV1F
64
Riley, G.(2012)Income-Elasticity of Demand. Retrieved fromhttp://tutor2u.net/economics/revisionnotes/as-markets-income-elasticity-of-demand.html
Page 23 of 37
Inferior

Good Types
increase, as they are more
expensive than inferior goods
BHD400, demand on normaltype phones increase65
Goods that are older and less
expensive than normal-goods.
The less income consumers
have the more inferior-good
they will buy66
Negative-Elasticity: Bahrainis’
have more money(income),
thus they will buy less of these
phones.

Samsung-note2



Nokia2700,3310
Pagers
Alcatel-OT209
Substitute & Complements
In each type, there are two products where the demand on one will change with a
percentage when the price of the other change, thus they have cross-price demand
Elasticity67.
Explanation
Demand Elasticity
(Cross-Price)
Examples
65
Hanratty, T.(2011). New Minimum Wages Push For Graduates. Retrieved fromhttp://www.gulf-dailynews.com/NewsDetails.aspx?storyid=313844
66
Investopedia.(n.d.) Inferior-Goods. Retrieved fromhttp://www.investopedia.com/terms/i/inferiorgood.asp#axzz2FLC0QEmz
67
Riley, G.(2012)Cross-Price-Elasticity of Demand. Retrieved
fromhttp://www.tutor2u.net/economics/revision-notes/as-markets-crossprice-elasticity-ofdemand.html
Page 24 of 37
Substitutes
Goods that are similar and
used instead of each other68
Positive-Cross: When the price
of one of them increases, the
demand on other one
increases and vice-versa
Complements
Goods that are used, and
sometime can only be used
together69
Negative-Cross: If the price of
one is high or increased, the
demand on the other will
decrease
SamsungS3 Vs. IPhone5
IPhone5 and its covers
Samsung-galaxyS3 and
macro-sim card
2.10-price elasticity of demand
A concept that measures the respond to the quantity-demanded of good to the change of its
price. The elasticity can be measured with the following equation70:
68
Investopedia.(n.d.) Substitute. Retrieved
fromhttp://www.investopedia.com/terms/s/substitute.asp#axzz2FLC0QEmz
69
Investopedia.(n.d.) Complements. Retrieved
fromhttp://www.investopedia.com/terms/c/complement.asp#axzz2FLC0QEmz
70
investopedia.(n.d.).Demand elasticity Retrieved from http://www.investopedia.com/terms/d/demand-elasticity.asp
Page 25 of 37
This concept is applied below on Info-land plus, a mobile-retailing shop demand of SamsungGalaxyS2 between 2011-201271:
Using the formula, Info-land-plus elasticity of Samsung-galaxyS2 demand is
(200−120)/120) 𝑋100
Ed= (156−260)/260)𝑋100
Ed=
66.7%
=1.6
−40%
The demand of Samsung-galaxyS2 is elastic, because Ed is more than 1. 40% price-decrease
will increase the quantity-demand by almost 67%. Meaning that 1% price-decrease will
increase the quantity by 1.6%.
71
Alaali, H.(2012). Interviewed by: Ali sarhan.[in-person].InfoLand-Plus.
Page 26 of 37
This elasticity can be explained with:

There are many substitutes in the market most obvious is the IPhone-series. Thus, a
decrease in the price lead customers to buy less from other substitutes and more of
the S2.

The original price of the S2 represented a big part of consumer's income. Thus when
the price decreased, consumers were instantly attracted to it as its now represent a
smaller portion of their income.
2.11-Price discrimination:
It is selling the same product or service to different buyers at different prices. For
example, "Zain" charges different installments for packages to different new customers. For
students who purchase a packaged-IPhone they will pay 3 months in advance (BHD66)
because their ability to pay each month is not. However, employed-Bahrainis pay 2 months in
advance, because they have stable income and sure to be able to pay the bill72. Meaning that
Zain, is discriminating with their prices on the basis of the ability to pay, in order to guarantee
that Zain will receive a portion of the price of the package.
3.0. Macroeconomic Concept
Macroeconomics is the study of the economy as a whole including its different industries; like
the mobile-retailing industry, by studying concepts like Gross Domestic Products and the
unemployment73
Mobiles are an important part of Bahrainis lives, and affect different aspects of their
economy. The mobile industry contributes with percentage in GDP by contributing in the
telecommunication-industry. The GDP was estimated by BHD9.7 billion in 201174. 4.4% or
426.8million goes to the telecommunication industry. The mobile-industry heavily contribute
in the telecommunication with 44%. As a result, the mobile-retailing industry contribute with
1.936% in the GDP75, Which is about BHD187.79 million.
72
Mohamed, H. (2012). ZainBH. Interviewed by Manar Janahi [in person] Zain branch: the center.
73Macroeconomics.(n.d)Retrieved
from http://www.investopedia.com/terms/m/macroeconomics.asp#axzz2E01oeJEV
74
CBB.(2012).Facts-Sheet.Retrieved from:
75TRA.(2011).Telecommunication
indicators in the kingdom of Bahrain.Retrieved from
http://tra.org.bh/en/pdf/2011TelecommunicationsMarketsIndicators-ForPublic.pdf
Page 27 of 37
3.1-The aggregate demand
It represents the real GDP, and is the sum of 4 main components:
C(consumption)+I(investment)+G(Government-spending)+NX(net-exports)76.
3.1.1-Consumption
It is the total consumption of mobiles in Bahrain. Mobile consumptions has been
increasing rapidly, despite a downfall between December-2010 to March-2011 where it
start rising again. It has finally reached (1.6M mobile-users) in 2011. The increased
consumption can be explained by the heavy competition between three of the biggest
mobile-retailers in Bahrain, VIVA, Batelco and Zain. The more consumption this industry
has the bigger its contribution in the GDP.77
76
Investopedia.(n.d).Retrived from: http://www.investopedia.com/terms/a/aggregatedemand.asp
77
BMI. (2012). Bahrain information technology report 2012. Retrieved from
http://search.proquest.com/docview/917807356/1359F86C8A027A966EB/1?accountid=62741
Page 28 of 37

Forecast of mobile consumptions(mobile-users)
This table shows the forecast of the mobiles consumption from the end of 2012, where it will
reach 1.72million users until the end of 2016 with 1.75 million users. This can be justified with the
fact that there are always new innovative mobiles that will refresh the market and increase mobile
consumption.78 From this forecast, it can be assumend that the mobile-industry will keep
contributing in the GDP over the next 4 years, and maybe with a higher percentage.
3.1.2-Investment
The increasing in mobile-consumption can decreases the savings; because consumers
need more money to spend on mobiles, resulting in less-money being saved in backs
and, thus less being sent to the financial sector. This resulted in the investment rate
to drop to 24.6% in 2011, which is evidence from the investment-rate graph78:
78Investment-Rate.(2012).Retrieved
from: http://www.indexmundi.com/g/g.aspx?c=ba&v=142
Page 29 of 37
3.2.3-The Net Exports
It is Exports minus imports79. Because of the huge mobile-consumption, Retailers had to
supply more which affected the net exports negatively. This can be explained that because
imports increase, the Net exports will decrease or at least not be as big as it could have
been.
3.1.4-Government spending
It is the Expenditures of the government80. The Bahraini-Government applies a few
income-taxes on Bahrainis (1% income-tax for unemployment support)81. Moreover,
when people spending increase on phones, the real value of the 1% will decrease;
thus less-support for the unemployed will be spent; resulting in a negative impact on
the GDP.
3.1.5-The circle of flow
This circle shows how the money will float in the economy82 this graph shows the effects,
positive and negative of increasing Consumption on the economy. (see next page)
79Net-Exports.(n.d).Retrieved
from:http://www.investopedia.com/terms/n/netexports.asp
80Government-Spending.(n.d).Retrieved
from:http://www.investopedia.com/terms/g/governmentpurchases.asp#axzz2ETxdV0Az
81Bahraini-Tax.(n.d).Retrieved from: http://www.taxrates.cc/html/bahrain-tax-rates.html
82Circular-Flow.(n.d).Retrieved from http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=circular+flow
Page 30 of 37
Page 1 of 37
Page 0 of 37
3.1.6-The Aggergate-demand Curve
A curve that represents the Aggregate-demand level. A rightly-shift is an economic-expansion
while a lefty-shift is an economic-construction.83 Because of mobile-industry, Consumption
and Net-Export have increased while the government-spending and investment rate
decreased. The graph is still expected to shift rightly due to the consumption being the largest
component of the GDP.
3.2-Unempolyment
The growing mobile-retailing industry in Bahrain has affected the unemployment rate. The
consumption leads to greater demand, which enables mobile-retailers to open new shops. In
2012, many mobile-retailing shops like Batelco84 and VIVA85, started opening new branches
across Bahrain. This result in more people being employed thus decreases the employability
rate.
83Aggregate-Demand
curve.(n,d).Retrieved from: http://www.cliffsnotes.com/study_guide/Aggregate-DemandAD-Curve.topicArticleId-9789,articleId-9737.html
84Batelco-News.(2012)Retrieved from:http://www.batelco.com/batelco_cms/NewsStory.aspx?nid=814
85VIVa open new shop.(2012).Retrieved from: http://www.twentyfoursevennews.com/bahrain-telecom/vivaopens-a-brand-new-store-at-sitra-mall/
Page 29 of 37
Since the mobile-retailing industry will help to decrease the unemployment, these effects are
forecasted:





Consumers having more money
More spending
Better life-standers
Might help Increasing the GDP
might help worsen the inflation rate.
Page 30 of 37
4.0-Conclusion
After analyzing the mobile-retailing industry from macroeconomic and microeconomics
perspective the result came as follow:
The macroeconomics concepts are scarcity, mostly in land as the need is more than the
available numbers. Factors of productions are natural resources(land) labor(employees),
human-capital
(skills),
physical-Capital
and
a
person
who
manages
these
factors(entrepreneur). Positive-analysis of this industry indicates that the number of mobileusers(1.6mm) in 2011, and normative analysis focuses on things like consumers’-preference.
Opportunity cost is explained using info-land buying SamsungS3 and note2 as an example
explained in details using the Production Possibility Curve. Moreover, Consumer’s Income,
substitution, complementary goods, population, and future-expectations are factors that shift
the demand-curve whereas good's price is a movement factor. Moreover, the supply-shifting
factors are production-costs, expected future-price, number of shops, and substitute's prices
while movement factors also include phones’price. The Bahraini mobile-retailing market has
a perfect competition equilibrium with a shortage of Samsung-galaxyS3 and a surplus of
Iphone5. The factors that cause shift in demand and supply also cause the movement of the
equilibrium-curve. In addition, perfect competition means that there are many buyers and
sellers, all participants are price takers and products homogeneous, demand is perfectly
elastic with no market entry barriers. Moreover, There are 4 types of goods in the market.
Normal(IPhone4),inferior(nokia2700),
substitutes(
IPhone5/Samsung-galaxyS3)
and
complements (Samsung-galaxyS3/macro-simcard). The demand of some phones is elastic as
shown in the Samsung-galaxyS2 example. Finally, some companies like Zain is discriminating
with their prices in order to guaranty receiving payments of some of their customers.
On the other hand, when analyzing the market from microeconomics point of view, the
mobile-market was found to hold about 1.6% contribution of the GDP. The mobilePage 31 of 37
consumption has been increasing and is forecasted to be 1.7mn by the end of 2012. This
increasing consumption leads to decreasing the investment rate to 24.6% of the GDP in 2011.
In addition, the real value of the 1% unemployment taxes decreased creating less investment.
At the same time mobile-imports increased thus decreasing the Net-exports. The Bahraini
GDP's circle of flow is thought to be experiencing an expansion, shifting the aggregatedemand curve rightly. Finally, because of the increase in consumption, retailers tend to open
new branches lowering the unemployment-rate the unemployment rate in the process.
Page 32 of 37
5.0-Appendices
Appendix (1):mobile phone penetration
86
Appendix (2): Bahrain employment rate
Bahrain employment rate
87
The graph shows the increase Bahrain has been facing in the parentage of people employed, since
2005 to 2009 where the rate decreased a bit. Nonetheless, the rate has recovered by the end of
2011. Moreover, the rate is expected to keep growing. This proves that Bahrain can provide the
mobile-retailing need for employees.
8686
Alpen Capital.(2011). GCC Retail Industry. Retrieved from
http://www.alpencapital.com/downloads/GCC%20Retail%20Industry%20Report%202011_1%20Nove
mber%202011.pdf
87
Imra(2012).Total employment. Retrieved from: http://blmi.lmra.bh/2011/12/mi_dashboard.xml
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