Question

the following graph for the next five questions. Assume the demand curve does not extend past the axes Cell Phones 350 Questions 1. What is the quantity of cell phones demanded when price is equal to $185 2. At which point (between A, B and C) would consumersas a group enjoy the greatest amount of consumer surplus? 3. Assume now that the price of the cell phone service (what you pay monthly to a carrier) has changed and that the quantity of cell phones demanded when price is $120 is now 1100. What has happened to the price of cell phone service 4. Now look at the cell phone market from the producer side. Assume that the machines and people that make cell phones can also make televisions. Assume that the price for televisions has now doubled. This will result in an supply which will shift the supply curve to the in A. Decrease; right B. Increase; right C. Decrease; left D. Increase; left

Answer 1

1) when price = $185, the quantity demanded = 0

2) at point C, the consumer surplus. Lower price yields higher consumer surplus.

3) price of cell phone service has reduced because now more is demanded at the same price.

4) the correct option is c) decrease; left.

Producers will start making more televisions and less cell phones because it gives them higher profit.