Intro to Economic Thinking: 1500 words

There are two brands of cell phones which are almost identical apart from for some minor features: the A-Phone and the Pomegranate.

Part I:

Draw the demand curve for the A-Phone. Describe how the graph, price and quantity demanded will change if the given occurs:

A) There is an on the whole increase in income.
B) There is an overall raise in income and people believe that the Pomegranate is now better than the A-Phone.
C) The price of the A-Phone goes up when a flaw is found in the Pomegranate.
D) A new kind of walkie-talkie has an unlimited range and is mainly free.
E) It is discovered that there are health concerns when employing cell phones.
F) There is a baby boom.
G) The price of the A-Phone and the Pomegranate both go up.

What occurs to the supply of cell phones if the market price goes up?

Part II:

Describe what happens to the price and quantity supplied and how it reflects on a graph if the given takes place:

A) It becomes more costly to produce cell phones.
B) More cell phones are being produced with the similar amount of inputs.
C) Walkie talkies are much popular as of the new technological change mentioned above.
D) The other company starts producing cell phones and now there are three producers in the market.
E) People think the price of cell phones will go up in the future.

Part III:

Draw a graph that shows the equilibrium price of cell phones. Describe what the graph is showing.

When the new manufacturer introduces the Robo cell phone to the market, how does that affect the equilibrium price if the Robo is fundamentally the same as the other cell phones?

Part IV:

As the public’s dependence on cell phones continues to grow, the cost of the phones might be reducing, however the stronghold that telecommunication companies have on the public in regards to contracts and climbing fees is alarming.

Additionally, all cell phone companies charge about the same prices, and the consumers do not have much choice in substituting providers. Consumers appear to require some controls in this regard, and the government decides to step in.

A) What is the effect of government intervention in the cell phone market? Make sure that you use graphs to exemplify your point.

B) Is this a good thing for consumers?

On the other hand, the government sees the raise in cell phone use as an opportunity to make some extra revenue, and it decides to tax service providers.

A) Who is really paying the tax?

B) Describe your conclusion on a graph.

C) Do you think that there is a free market for cell phone users? Why or why not?