In July 2016 Apple's share of the UK market for smartphones was 38% - Edexcel - A-Level Economics A - Question 8 - 2018 - Paper 1

To evaluate whether Apple's 38% market share in the UK smartphone market is in the consumer interest, we can use a structured approach including diagrammatic analysis and economic principles.

Understanding Monopolistic Market Share

Firstly, a market share of 38% exceeds the 25% threshold defined by the Competition and Markets Authority (CMA) as indicative of potential monopoly power. This suggests that Apple may exert significant control over pricing and market conditions.

Diagrammatic Analysis

A monopoly diagram illustrates the relationship between price and output. The standard setup includes:

• Downward sloping demand curve: showing how price decreases with increased output.
• Marginal cost (MC) and Marginal Revenue (MR) curves: indicating the cost of producing an additional unit and the revenue generated from it, respectively.
• Supernormal profits can be depicted where the average revenue exceeds average total costs (ATC).

This diagram helps to visualize how, at high market shares, a firm can set prices above marginal costs, potentially limiting consumer choice and inflating prices.

Consumer Interest Considerations

• Positive Aspects: Apple’s dominant market share could lead to greater efficiency through economies of scale, allowing lower costs to be passed on to consumers. Investment in quality products and customer service may also enhance consumer satisfaction.

• Negative Aspects: Higher market share can lead to higher prices if profit maximization is prioritized over consumer welfare. This can reduce competition, leading to potential collusion with fewer rival firms in the market, thereby decreasing innovation.

Conclusion

Ultimately, the impact of such a market share on consumer interest can be multifaceted. It can foster both positive outcomes, such as improved product quality and customer service, and negative outcomes, such as diminished competition and higher prices. Therefore, regulation and monitoring are vital to ensure that high market shares do not exploit consumers and that the market remains competitive.