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The A-Phone and the Pomegranate

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MICRO Week 1 IP Assignment
There are 2 brands of cell phones that are almost identical except for some minor
features: the A-Phone and the Pomegranate. Draw the demand curve for the A-Phone.
Explain how the graph, price, and quantity demanded will change if there is an overall
increase in income. It is discovered that there are health concerns when using cell
phones. What happens to the supply of cell phones if the market price goes up? Explain
what happens to the price and quantity supplied and how it reflects on a graph if it
becomes more expensive to produce cell phones. Another company starts producing cell
phones, and now there are 3 producers in the market. 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 affect the
equilibrium price if the Robo is basically the same as the other cell phones? 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?
Demand Curve : Quantity vs. Price relationship.
A cell phone is more of a luxury than a necessity and is also our method of communicating
with each other. Through the use of cell phone we are able to communicate rapidly in
addition to play music, video, SMS text messaging and surfing the internet. The A Phone and
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the Pomegranate are identical in features and have internet, communication, SMS, video
recording, camera with 3.5 pixels resolution and also a touch screen. Therefore, both the A
Phone and the Pomegranate are having almost identical features except minor changes in the
body part, colour and the software's used by them. A Phone uses its own proprietary software
whereas Pomegranate uses the android software in its phone. From the vantage points of
economists, a household’s needs are easily determined based on biological factors and the
amounts of a good consumers will purchase under various conditions can be identified
through demand and supply. A Phone recently announced that it had sold a total of 1 million
A Phones and the price was $699 when introduced in March, 2012 and in October , 2012 A
Phone cut the price to $499. How did this affect A Phones sales? Economics tradition is to
quantity on horizontal axis, price on vertical axis and in this case the demand curve slopes
down which means a higher price results in lower quantity demanded and vice versa.
The demand function for a good reports the number of units that demanders will want to buy
as a function of the price of the good and the individual demand function is the number of
units one person will buy as function of price. The total market demand will be the total
number of units bought as a function of price. For a product such as an A Phone most
demanders will buy one unit or none at all and for them a second unit is not of much use or
may not be required.(Similar to the case of a refrigerator in a single house). The reservation
price is the highest price that the consumer is willing to pay to have the good rather than not
have it. Lower market prices increase the amount of surplus available to the consumer in the
market.

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