Supply and Demand and Cell Phones

Damita Nix 1/15/2012 CTU Online ECON202-1201B Phase 1 Individual Project1 Instructor Olanrewaju Abstract This paper will explore the world of two particular types of cell phones that are identical with minor features. I will be demonstrating skills in using the tools of economics for decision making for the firm operating in the market economy to include supply and demand, elasticity of demand, consumer behavior and utility maximization, and the costs of production both short-run and long-run. I will also be demonstrating the ability to clearly present views in written and/or oral expression. On the web, I will research additional information about the A-Phone and the Pomegranate. The task below also requires me to draw graphs of supply and demands increases and decreases. When the task is complete you will have learned about the demand curve of an A phone, a clear understanding on what happens to the price and quantity supplied, equilibrium, and effects on government interventions with cell phones. Title: Cell Phones Part I Draw the demand curve for the A-Phone. Explain how the graph, price, and quantity demanded  will change if the following occurs: * There is an overall increase in income. There is an overall increase in income and people believe that the Pomegranate is now better than the A-Phone. * The price of the A-Phone goes up  when a flaw is found in the Pomegranate. * A new type of walkie-talkie has an unlimited range and is basically free. * It is discovered that there are health concerns when using cell phones. * There is a baby boom. * The price of the A -Phone and the Pomegranate both go up. Price P1 P2 P3 Demand Q1 Q2 Q3 Quantity What happens to the supply of cell phones if the market price goes up? Part II Explain what happens to the price and quantity supplied and how it reflects on a graph if the following occurs: * It becomes more expensive to produce cell phones. * More cell phones are being produced with the same amount of inputs. * Walkie talkies are popular because of the new technological change mentioned above. * Another company starts producing cell phones, and now there are  3 producers in the market. * People think the price of cell phones will go up in the future. PriceSupply P1 Q1 Quantity Part III Draw a graph which shows the equilibrium price of cell phones. Explain what the graph is showing. When the new manufacturer introduces the Robo cell phone to the market, how does that effect the equilibrium price if the Robo is basically 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 may be decreasing, but 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 need some controls in this regard, and the government decides to step in. * What is the effect of government intervention in the cell phone market? Make sure that you use graphs to illustrate your point. * Is this a good thing for consumers? On the other hand, the government sees the increase in cell phone use as an opportunity to make some additional revenue, and it decides to tax  service  providers. * Who is really paying the tax? * Illustrate your conclusion on a graph. * Do you think that there is a free market for cell phone users? Why or why not? References