Introduction
Many factors affect the volume of production and sales of a particular company. Among other things, supply and demand play a significant role in a product’s success in the market. The concepts of demand and supply analysis allow manufacturers to optimize their costs and earn more profits by attracting and retaining customers. These concepts include, for example, the availability of substitutes and complementary goods and services, whether the product is a normal or an inferior good, and the effects of non-price factors. Currently, Smart TVs are quite popular in the technology sector because their functionality is growing, and people find it essential to have at least one Smart TV in their household.
The Good’s Main Characteristics
Smart TVs entered the market approximately in 2007, introducing new opportunities for their consumers. According to researchers, due to people’s growing interest, by 2015, many major manufacturers focused precisely on making Smart TVs and adding unique features to them (Snead, 2022). Unlike general budget models, Smart TVs contain numerous functions similar to those of smartphones and laptops. For example, users can access the Internet, have a greater variety of TV programs and channels, play video games, and use special applications (Snead, 2022). Noticeably, “Smart TVs have their own ‘TV operating system (TV OS)’ and Graphical User Interface (GUI)” (Snead, 2022, para. 5). Users can install regular software updates, which allows their TVs to work better and longer and show images and play sounds of much higher quality. Consequently, many notice that this is a combination of an average TV and a computer or a smartphone (Snead, 2022). Although this technology is not a necessity, people enjoy having it because Smart TVs are a unique way to watch movies on a huge screen and, unlike simple TVs, mostly without ads.
The Good’s Substitutes and Complements
Similar to other products and services, Smart TVs have their complements and substitutes. For example, if one cannot afford this good or does not find the functions it offers to be beneficial, one can buy an average TV with the same high-quality imaging and sound. Further, computers, tablets, and smartphones are great substitutes for Smart TVs as well because they have the same functions, and the only difference is a smaller screen (Snead, 2022). Further, many users find TVs and streaming media players (SMPs) to be complements to each other (O’Halloran, 2022). OTT (over-the-top) providers, including Netflix, Apple TV, Amazon Prime, Hulu, and others, also complement the good.
TVs as Normal Goods
Services and goods can be divided into normal and inferior, and Smart TVs refer to the former group. Generally, this division is based on a criterion of whether the demand for a product or service decreases or rises in accordance with a growth or a drop in customers’ income. Concerning this paper’s example, the more people earn, the higher the demand for Smart TVs becomes. Thus, statistics show that 94.8 million users had at least one Smart TV in 2018, compared to 102.6 million persons in 2019 (Laricchia, 2022). In relation to Americans’ average income rates, there was a growth from approximately $65K in 2018 to $69.5K in 2019 (Flynn, 2022). At the same time, Smart TVs are not referred to as the necessary technology, and there are appropriate substitutes for them. As a result, whenever customers’ income levels decrease, the demand for this good becomes lower as well. The reason is that people can either purchase an average TV or use their smartphones for the same needs that a Smart TV would address.
Non-Price Factors Affecting the Demand
A number of determinants other than the good’s price affect the rise or decrease in the demand for it. Thus, as mentioned above, the demand for Smart TVs grows if consumers’ income increases, and vice versa (Flynn, 2022; Laricchia, 2022). The second factor is the expected changes in Smart TVs’ prices. For instance, if potential customers predict that TVs will be more expensive in the near future, they might purchase one now, which makes the demand grow. Thirdly, the price of substitute goods can also have an effect (Accounting Tools, 2022). The cheaper the substitutes for Smart TVs become, the lower the demand for this good gets as people can prefer purchasing average TVs, smartphones, and laptops instead. However, it is unlikely that a change in price for complementary products and services affects the demand for Smart TVs because the latter can be used without additional subscriptions or streaming media players (Accounting Tools, 2022). Finally, a great impact is played by branding: the more manufacturers advertise their TVs and the increased functionality they offer, the more people will buy one.
Non-Price Factors Affecting the Supply
Further, the supply of Smart TVs can be affected by several non-price factors. Firstly, the cost and availability of resources for production have a strong impact on the total number of TVs supplied in a given time period. If the production costs are quite high, or there is a lack of the required resources, manufacturers’ willingness to deliver the goods will drop (“Supply Function,” n.d.). Next, expected market changes are always considered by suppliers of Smart TVs. Similar to clients predicting a shift in prices, which is mentioned in the section above, manufacturers also consider this factor. Thus, the higher the prices for Smart TVs are expected to be in the future, the lower the supply becomes now, and the larger it will be as soon as prices grow (“Supply Function,” n.d.). Finally, rigorous competition in the market and advanced technological developments allow for an increase in the supply of the identified goods.
Demand and the Equilibrium Price and Quantity
There are certain effects that a change in demand has on the equilibrium price and quantity of the selected good. According to researchers, “the equilibrium price is the price at which the quantity demanded equals the quantity supplied” (Bergman, 2020, para. 13). Consequently, if all other factors remain unchanged, a rise in the demand for Smart TVs will result in the growth of both the equilibrium price and quantity. On the contrary, if fewer people want to purchase TVs, these two factors decrease. In other words, if manufacturers notice that more Smart TVs are in demand in a certain period of time, they will be interested in selling them at higher prices to receive more profit. The quantity of TVs available for sale will increase as well to satisfy the needs of all potential customers. However, lower demand for Smart TVs will make the suppliers reduce the prices to receive any profit and reduce the quantity supplied.
Supply and the Equilibrium Price and Quantity
Further, specific shifts in the supply of Smart TVs result in changes in the good’s equilibrium price and quantity. Overall, as noticed by Bergman (2020), “an increase in supply, all other things unchanged, will cause the equilibrium price to fall; quantity demanded will increase” (para. 13). To be more precise, when cost production is low, many manufacturers produce more TVs. To sell them effectively, they might reduce the price to attract more buyers, and the latter will be successful as many potential clients prefer purchasing technological devices at lower prices. However, if the supply of TVs drops significantly, a shortage of the goods appears, which allows companies to increase prices as they need to compensate for the lack of sales (Bergman, 2020). At the same time, fewer people will want to purchase expensive TVs, and the quantity demanded will drop.
Predicted Demand for Smart TVs
The provided overview of the product allows predicting that there will be a rapid and noticeable growth in the demand for Smart TVs. Firstly, major brands, such as LG, Samsung, and other manufacturers put in much effort to promote these technological devices and advertise their superiority over regular TVs (Adgate, 2022). Secondly, although the COVID-19 pandemic has caused many people to lose their income, the need for them to have sources of virtual entertainment has grown (Adgate, 2022). As a consequence, it is expected that the number of persons preferring Smart TVs over other alternatives will increase over the next years. Finally, researchers note that “the overall demand for Smart TV is projected to grow at a CAGR of 20.8 % between 2022 and 2032, totaling around US$ 1,910,44 Million by 2032” (“Smart TV Market,” 2022, para. 1). Therefore, the prediction of the demand for Smart TVs to grow significantly over the next five years is most likely to be correct.
Predicted Supply of Smart TVs
Eventually, it is also possible to project the supply of the selected good in the near future. Overall, one may state that major manufacturers of Smart TVs will have all the required resources to supply their customer base with the demanded quantity of the product, and no severe challenges are expected. The general Smart TV market will expand over the next years, and since companies are currently aware of the growing demand for Smart TVs, they will make sure to address it (Adgate, 2022). Further, research also indicates growth trends: “A report from Display Supply Chain (DSCC) predicts that shipments of advanced televisions will grow at a CAGR of 17 percent in the period to 2026” (Forrester, 2022, para. 1). Therefore, there will not be a shortage of TVs as the rates supply will proportionally with the increasing demand.
Conclusion
To conclude, the application of the concepts of supply and demand analysis allows for a better understanding of the current and future trends in the Smart TVs market. Smart TVs revolutionize the industry, and various factors make the demand for them grow, notwithstanding challenges like the COVID-19 pandemic that has negatively affected people’s income levels. Nonprice factors, such as consumers’ solvency, projected changes in Smart TVs’ price, the price of substitute goods, and others, affect the demand, while resources’ cost and availability and expected market changes impact the supply. Eventually, it is likely that the demand for and supply of Smart TVs over the following five years will increase.
References
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Adgate, B. (2022). Executives from LG, Samsung & Vizio weigh in; the role of Smart TVs with advertisers and audience measurement. Forbes. Web.
Bergman, M. (2020). Principles of economics [eBook edition]. University of Washington.
Flynn, J. (2022). 25+ essential average American income statistics [2023]: Household + personal income in the US. Zippia. Web.
Laricchia, F. (2022). Number of smart TV users in the United States from 2016 to 2022 (in millions). Statista. Web.
O’Halloran, J. (2022). Smart TVs, media players complement each other in streaming. Rapid TV News. Web.
Snead, A. (2022). How do I know if I have a smart TV? Smarter Home Guide. Web.
Supply function. (n.d.). Toppr. Web.