Economic Impact of Mobile Application Development

Mobile application software is software designed to operate on mobile devices such as tablets and smartphones. This surge in software development draws new developers, opening up new markets for the future development of mobile phone applications and services (Kumar 55). Because many individuals own phones in this day and age, the development of mobile applications has significant economic implications for the global economy. The economic impact of mobile application development is discussed in terms of market structure, supply and demand, elasticity, market obstacles, taxation, and consumer behavior.

The world of mobile applications has a monopolistic market structure. The sellers are many, and each seller has a different product (Schäfer 9). It is almost same as the imperfect competition market structure. In this field, there are no barriers to market entry. The market is open to freelance and many new developers. No entry barrier to the buyers and the market has large numbers of buyers.

App store was the first application site developed by Apple. In a short period, there were new entries from Google by their Android, Blackberry, and Microsoft. This was possible due to lack of entry barriers. The market is open for self-employed developers making the market to have many sellers and buyers.

Competition is free and fair, and every developer is struggling to identify the market demands and develop a product that is in demand (Schäfer 9). To add on, the developers have control over the market prices; consumers buy whatever as they have a perception that there is no difference in the prices and no develop has control over the market all these are characteristics of the monopolistic market structure.

Mobile application development has a market structure composed of four key players. Microsoft OS for Microsoft phone, RIM OS for blackberry, IOS app for apple phones, Limo for the Linux mobile operating systems and Android for Google as the major market players. Distribution of the applications starts by the developer developing the application using the development tools he publishes the app at the application portal, the consumer downloads the app from the portal the payments are made through the application portal and the developer gets his returns through the same gateway (Kumar 55).

Android applications are found at the Google play store. The play store is the application portal that interlinks developer tools and the developer. The app store is the consumer interface where the clients search for the application they need. At the play store, the apps are classified in different ways to ease the search. There are top free apps, paid apps, trending apps, family and games apps. Clients can pay for the apps through the portal. The data used in downloading the app is a way of payment (Kumar 55). This is an example of how the applications are distributed from developer to customers.

Increased invention and development of mobile phones has foreseen the increase in the supply and development of mobile applications. The growth in the use of internet has foreseen the development of mobile applications. The mobile apps come with various uses like reading eBooks, playing games, listening to music and ePayment systems (Donner 318). The increase in development of apps means that understanding demands drivers of applications are important. The demand of the application depends on the advancement of the network technology, the mobile data costs and the adoption of smartphones.

Application demands increase depending on the file size, applications age, and the app description. Lifestyle apps like the period and ovulation calculators have an increased demand by the female consumers. Gaming apps like candy crush and temple run have a high demand by young consumers (Holzer 26). Supply of the applications by the developers depends on the file size and the demand for the app. In demand, consumer preference shows a high correlation across same apps.

WhatsApp is an example of an application with high supply and demand across the globe. A communication app connects various people across the world. People can send text messages, share pictures and documents by use of mobile data or Wi-Fi. The application targets both the young and old people. Communication is a must for everybody the demand of the application is high.

The elasticity demand is defined as the price change depending on the demands. The said products have elastic change if its price is responsive to the demand. Inelastic change is a scenario where the price change is high while the demand of the quantity is same or less (Kumar 55). Elasticity curve of the application market is elastic one. Prices of the application are responsive according to the demand (Schäfer 9). Free applications have higher demands than those being sold. The prices of the applications various are according to the demand.

Perfect elastic in this sector is because there are many substitutes for the apps. Each developed app has an alternate app from a different developer. Therefore, the prices are elastic they change according to the demand. Competitive markets are also a major contributing factor to the elasticity of the markets. Perfect elastic also comes from the high incomes in the industry. The elasticity demand curve of the mobile application development has a horizontal demand meaning that the demand for the apps is infinite. The developers are price takers in this type of market structure.

In the communication sector, Facebook Messenger, IMO and Whatsapp are the few example of software used for communication across the growth. Each is a substitute for the other (Kumar 55). Their price depends on the demand showing that the application market has an elastic demand. These applications have horizontal demand curve thus fits in the characteristics of perfect elastic. Competition in this sector is the main reason for the perfect elastic curve.

Mobile application development is a free market. There are no barriers for the new developer. Freelance developers and new developers do not experience any barriers for their innovations. Application portal is the interface between the developers and the consumers. New markets are readily available for new developers.

Moreover, there are no barriers to market entry. The market is open to freelance and many new developers. No entry barrier to the buyers and the market has scores of buyers. Being a free market, it has a significant impact toward the economy. Lack of barriers enables the consumers to buy what suits their needs and attracts new developers and sellers.

Applications contribute to the world economy through tax. All the government taxes all the downloaded applications. Accessing the applications requires the use of data or Wi-Fi. The data service providers file taxes in accordance to the set tax percent. The application companies like Google and Apple also pay their taxes. Every player in the market is required by the law to pay taxes in accordance to their returns. Taxation is the main contribution to countries’ income. Therefore, mobile application development has an economic impact across the globe.

It is important to learn about the consumer’s behaviors and patterns. Individual and group behaviors are the factors to be considered when developing applications. The trends of consumers are necessary. Developers focus on all the buyers’ patterns and thus come up with apps to suits the patterns. In this era, applications for health, money and lifestyle are on demands (Holzer 22). People focus on applications like the mobile payments for their cash and beauty app for the women. Understanding consumer behavior is important when securing and disposing of the products. The prices of applications depend on the consumer’s behaviors. Buyers’ pattern is the main demand factor. Low demand means the low price to attract customers. High demands come with a high price. Consumer behavior also helps the developer to identify the customers need and on ways to satisfy the needs.

Mobile money transfers, mobile payment, and mobile banking applications have a direct impact on the economy. Mobile money transfers facilitate sending and receiving money at the comfort of a person’s mobile phone. People can nowadays pay for goods and services through the mobile payment system (Donner 318). Mobile money and banking system are applications linking people’s phone and their bank. People access their cash through their mobile phones, and they do not have to go to the bank to get services.

M-Pesa is the first launched of mobile money transfer service owned by Vodacom for Safaricom, a communication provider in Kenya. M stands for mobile while Pesa is a Swahili name for money (Smith 287). The application enables users to deposit and withdraw money, send and receive money to other users, pay bills like water and electricity bills, Purchase airtime and transfer money through other services like banks and Sacco’s. The application software expanded through various countries like South Africa and Eastern Europe as their markets. This is an example of software that has significant economic impact. It is a source of employment for people (Smith 287). Individuals are employed as the agents who facilitate the smooth running of the deposits and issuing money when a person is withdrawing. The transaction costs are the profits of the company. The company pays taxes and thus contributing to economic growth. The application has a high demand and supply. The elasticity demand of the software is a perfectly elastic demand curve.

In conclusion, mobile application development has been on the rise over the recent years. Apple store was the first storefront to be developed. Both Apple store and Google are the storefronts used by various developers to market their products. The monopolistic market structure is the way to go in this market sector. Application world is a free market with no entry barriers for both sellers and buyers. Lack of barriers has foreseen the entrance of new sellers and freelance developers. Perfect completion is experienced in this market setting. Consumers’ behaviors are the determinant of the demand and supply of the applications. Software’s have a perfectly elastic demand curve (Holzer 22). Selling and buying of apps also contribute to general tax and thus contributing to countries income. Various applications create employment opportunities for people. Money transfer services facilitate the running of money in the economy thus creating a positive impact in the economy.

Works Cited

Donner, Jonathan, and Camilo A. Tellerz. “Mobile banking and economic development: linking adoption, impact, and use.” Asian journal of communication, vol. 18, no. 4, 13 Nov. 2010, pp. 318- 332.

Holzer, Adrian, and Jan Ondrus. “Mobile application market: A developer’sperspective.” Science Direct, vol. 28, no. 1, Feb. 2011, pp. 22-31, www.sciencedirect.com/science/article/pii/S0736585310000377. Accessed 7 May 2017.

Kumar, Subodha. “Mobile applications.” Optimization Issues in Web and Mobile Application development: Past and Future Trends, springer, 2015, p. 55.

Schäfer, Martin. “Market structure.” resource extraction and market structure, springer, 2012, p. 9.

Smith, Mathew L., et al. “examining trust in mobile banking- case study of M-Pesa in Kenya.” Social Dimensions of Information and Communication Technology Policy, springer publishers, 2010, p. 287