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Health Economics

By | August 2012
Page 1 of 2
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.
Many variables other than price can influence demand. The five most important are income, prices of related goods, tastes, population and demographics, and expected future prices. The income that consumers have to spend affects consumers’ willingness and ability to buy a good. A normal good is a good for which the demand increases as income rises and decreases as income falls.

* 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...
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