Why is iPhone X sold much better than iPhone 8?

The answer to the question that why iPhone X is sold much better than iPhone8 can be concluded by one simple answer, that iPhone X is much better than iPhone 8. However, I would like to answer this question from a different angle, consumption decision making (the demand side factor), rather than the quality differences of the products (could be seen as the supply side factor).

There are two main factors that consumers concern about when making their consumption decisions: one is the price, and the other is the utility. The prices between iPhone 8 and iPhone X are different; however, in my opinion, such price difference has not been significant enough to differentiate the two products’ target consumer groups. Once both phones target the same consumer group, the two phones compete with each other. Since the utility gained from an iPhone X is so much greater than the utility gained from an iPhone 8, consumers of course prefer iPhone X over iPhone 8, unless consumers are extremely inpatient that they could not wait for one more month after iPhone 8 is available (of course, the time could be longer as the consumers need to wait another several weeks after they place their orders for iPhone X). Therefore, when the demand for iPhone 8 is low, it also implies that the demand for iPhone X is much greater, as the total demand for higher-tier iPhone is relatively fixed.

In addition, the utility gained from buying a iPhone does not only come from the functions that an iPhone has got, but also comes from the signals sent from buying an iPhone. The signal effect of buying an iPhone is sometimes more important than the actual functions that the machine gives to is. Owning an iPhone can signal others that you are a fashionable, cool person from a good background (such as having relatively higher incomes, wealthy family backgrounds, being young and energetic). When consumers are trying to choose between iPhone X and iPhone 8, the effective signalling effect of buying an iPhone 8 only lasts for a month before iPhone X appears in the market, so the average cost of buying the signalling effect of an iPhone 8 is a lot more expensive than the average cost of buying the signalling effect of an iPhone X.

Therefore, from customers’ perspective, it seems more cost efficient to buy a relatively more expensive iPhone X, as the signalling functions gained from the two products are incomparable and the signalling function is the most important function for many consumers.

Should individuals with low net wealth actively participate in the financial market?

Traditionally the financial market is the playground of high net wealth individuals. However, I have a different opinion about whether those from less wealthy backgrounds should participate in financial market activities or not. I think that people from less wealthy background should definitely participate in financial market activities, and this is not just going to benefit these individuals, but also going to be socially desirable.

The existence of the social wealth gap is not only caused by the income differences, but more importantly caused by their different levels of investment returns in the financial market. Over the past several years, the average income of the middle classes in America has not increased significantly; however, the wealth gap is keeping widening and the record for the wealth of the richest man has been higher and higher. Here comes a question how to close the gap between the investment returns of the wealthy and the less wealthy.

However, when people from disadvantageous backgrounds enter the financial market, they are very likely to be in a weak position, as they do not have sufficient abilities and resources to match the strength of the wealthy investors. This means if they enter the financial market without any external support or help, they are very likely to lose more to the wealthy classes and the wealth gap could be even widened. Therefore, investors should participate in the financial market collaterally and they should have help from professionals. In addition, if the government is able to control individuals’ pensions, the government could invest the pension funds and then distribute pensions progressively that less wealthy pensioners could receive a higher return rate and wealthier pensioners could receive a lower return rate, this can help to redistribute the wealth among the retired population and narrow the wealth gap.

To conclude, individuals with disadvantageous backgrounds should join the financial market activities, this is important to close the wealth gap. However, because of their backgrounds (including abilities and resources), they should be given additional support and their investment should be conducted collaterally by professional experts.

Taxation and individual welfare

Based on microeconomics theories, it is often to see direct taxation is more efficient than indirect taxation, this means through a direct taxation system, the government is able to receive more tax incomes. However, there are some macroeconomists that are arguing consumption tax is the best tax, and could potentially be the universal tax. The major difference between microeconomics and macroeconomics is that from the macroeconomics prospective, the policy maker focuses at the aggregate population welfare and does not care about particular individuals or groups’ welfare, on the other hand, from the microeconomics prospective, the welfare of individuals and individual groups is recognised and studied.

In reality, a universal taxation system is not desirable that if imposing direct taxes on incomes, the government cannot effectively reduce the consumption with negative externalities, also if imposing indirect taxes on consumption, the government cannot effectively control the wealth gap existing in the society, this could be a serious issue. Therefore, it is impossible to merely choose one or the other from direct and indirect taxations.

Usually we can suppose the aggregate loss of individuals’ welfare from paying taxes should be equal to the aggregate gain of social welfare provided by government expenditure. However, since governments nowadays generally borrow more than they earns to spend, the aggregate gain of social welfare could be greater than the aggregate loss of individuals’ welfare.

Who should pay for your data usage?

Nowadays, people are almost addicted to smartphones, and there are many smartphone applications that have been developed to provide more entertainment and improve productivities. During our ordinary day, what makes us consume data usage? I think most of data usage is created during using applications on our smartphones. Then it raises a question that if application developers pay for our data usage. My answer is they could but they do not have to.

There have been more and more application developers that cooperate with carriers to provide their users with free charged data when using their applications. In China, this has become more and more common; in Britain, some carriers also start to work with application developers, but usually those traditional developers, such as Netflix. However, there is a common character of the application developers that seek cooperation with carriers. The majority of these applications are those who require large amount of data usage, such as YouKu, Netflix, and other similar online video applications. This is understandable as these developers want people to use their applications for longer hours, which is a very important factor to measure their popularities (this will relate to their abilities of receiving financing and values of their companies). This is because the demand of their users is not only constrained by their time, but constrained by the costs of using data usage. If they can reduce the costs of using data for their users, this is very likely to encourage their users to spend more time on their applications.

However, to applications which do not consume much of their users’ data usage, such competition strategy seems unnecessary and could be costly especially when they are still small developers. Therefore, developers could use consuming data for their users as a marketing strategy, but this strategy is optional, not necessary.