Demand and Supply Analysis of Mobile Services in India

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INTRODUCTION: India is going through a telecom revolution, especially in the wireless telephony segment. The adoption of mobile telephony remains unparalled in scope, as users from diverse segments increasingly choose to exercise the option of personal mobility. On an average the user base has been adding 4-5 million subscribers per month. The Mobile subscriber base is growing at a scorching pace in India and it is the “fastest growing mobile market in the world”. The Wireless subscribers have reached to 261.07 million as on 31st March 2008. The penetration level of mobile services is still below 30% in India, hence there is a huge potential for growth in this segment. But the scenario is different in the other countries since…show more content…
Price in Rs. Quantity in Mill minutes 2.65 100 1.5 180 Relatively Elastic demand for mobile services. Effect of Tax on mobile services: Mobile services are subject to indirect taxation imposed by the government. Here we consider the effects of indirect taxes on a producers costs and the importance of price elasticity of demand in determining the effects of a tax on market price and quantity. As mobile services in India are relatively elastic, the service providers have to absorb the tax imposed on them. The demand curve is drawn as price elastic. The mobile service provider must absorb the majority of the tax himself. When demand is elastic, the effect of a tax is still to raise the price – but we see a bigger fall in equilibrium quantity. Output has fallen from Q1 to Q2 due to a contraction in demand. Comparison of Mobile services in India and US: In United States, the mobile service market is relatively inelastic. Since the markets are already saturated, for any price change there is little scope for any drastic changes in the demand for mobile services. (a) In United States (b) In India Joint Demand: Joint demand says if the quantity demanded for one product increases the demand for another product also increases. The Concept of joint
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