There are 2 brands of cell phones that are almost identical except for some minor features: the A-Phone and the Pomegranate. 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. 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. 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 XXXXX XXXXX 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? You just opened a flower shop and are trying to understand pricing issues. You were told that elasticities are very important in determining prices and what products to supply, so you decide to investigate this concept. You call your friend, an economics professor, and ask, "What is the price elasticity of demand? What determines it? What is elastic and inelastic demand?" To really understand it, compute the following price elasticities of demand: •The price of a laptop increases by 20% and there is a 40% drop in the quantity demanded. •The price of a pack of cigarettes increases by 10% and there is a 5% drop in the quantity demanded. •The price of water increases by 15% but there is no drop in the quantity demanded. Of the above examples, which is more elastic, and which is the least elastic? Why? Answer the following questions: •Why is elasticity an important concept for a business? What if national income went up? How would that affect elasticity? •What is the price elasticity of supply? What determines it? •Compute the following price elasticities of supply: ◦The price of a hotel room increases by 20%, and the quantity supplied increases by 10%. ◦The price of health care goes up by 50% , and the quantity supplied increases by an equal amount. ◦The price of a book increases by 10%, and the quantity supplied increases 20%. ◦In the above examples, which is more elastic and which is the least elastic? Why? •What kind of supply and demand elasticities would the following goods have, and why? ◦Bridge tolls ◦Beachfront properties ◦Gourmet coffee ◦Luxury automobiles ◦Gasoline ◦Cell phones ◦Computers ◦College tuition Now that you are an expert on elasticities, what do you think would be the best time of year to raise prices, and why? What do you think the elasticities are in the flower business? Use graphs and hypothetical tables to support your answer.
You are the owner of a small bread factory and are thinking of lowering costs and expanding. Your small-business advisors suggested that you first review your operations and make some technological changes. Complete the following:
The next thing that your small business advisors asked you to do was to break down your costs and see what you can reduce.
Quantity of Workers
Quantity of Ovens
Quantity of Loaves of Bread Produced
Cost of Ovens
Cost of Workers Per Week
Key Assignment Draft
You are starting your own Internet business. You decide to form a company that will sell cookbooks online. Justcookbooks.com is scheduled to launch 6 months from today. You estimate that the annual cost of this business will be as follows:
Technology (Web design and maintenance)
Postage and handling
Inventory of cookbooks
Deliverable Length: 1 graph plus calculations
You must give up your full-time job, which paid $50,000 per year, and you worked part-time for half of the year.
The average retail price of the cookbooks will be $30, and their average cost will be $20.
Assume that the equation for demand is Q = 10,000 – 9,000P, where
Q = the number of cookbooks sold per monthP = the retail price of books.
Q = the number of cookbooks sold per month
P = the retail price of books.
Show what the demand curve would look like if you sold the books between $25 and $35.
Deliverable Length: 1,000–1,500 words
Address the following questions:
Key Assignment Final Draft
Inventory of cook books
Deliverable Length: 1 paragraph plus calculations
The average retail price of the cookbook will be $30, and the average cost will be $20.
Deliverable Length: 600–800 words
The government decides to tax cookbooks because they feel that they encourage overeating and can lead to health issues, such as obesity and heart disease. Answer the following:
Deliverable Length: 600–850 words
Justcookbooks.com becomes wildly successful in the United States, and you decide to export overseas. Answer the following:
In the article entitled "The Economic Effects of Labor Unions Revisited," Vedder and Galloway attempt to prove statistically, using historical data, that labor unions do not have a good effect on the economy. Read the article, and explain the following microeconomic concepts that the authors discuss and how they are related to unions:
The article focuses on harmful economic effects, but also mentions some positive aspects. What are they? Does moral hazard apply to unions? Why or why not?
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