For tech-conscious consumers facing stagnant wage growth, refurbished smartphones have become an attractive alternative. In 2023, major manufacturers raised the launch prices of new flagship models by over 15%. This pricing shift was driven by soaring semiconductor costs and increased investments in AI-integrated chipsets. (lines 1–4)
Global sales of refurbished smartphones grew by 12% over the same period, led by third-party online marketplaces. Market analysts noted that refurbished devices are highly responsive to price hikes of new flagship phones, acting as close substitute goods (line 7). The cross elasticity of demand (XEDXEDXED) between new flagship devices and certified refurbished models was estimated to be +1.4. (lines 5–9)
"Consumers still want premium features, but they are increasingly unwilling or unable to pay the four-figure retail price for a brand-new device," remarked an industry analyst. (lines 10–12)
Define the term 'substitute goods' (Extract C, line 7).
256 exam-style questions on AQA A Level Economics 1.3 Price determination in a competitive market, covering 1.3.1 The determinants of the demand for goods and services, 1.3.2 Price, income and cross elasticities of demand, 1.3.3 The determinants of the supply of goods and services, 1.3.4 Price elasticity of supply, 1.3.5 The determination of equilibrium market prices, and 1.3.6 The interrelationship between markets. Each one has a worked solution and a mark scheme showing where the marks go.