Question

Consider the market for IPhones. For each of the events listed here indicate whether demand or supply is increased or decreased.

1) A study reveals that mobile phone usage causes cancer.

2) A strike in the Lithium mines raises the Lithium price (Lithium is considered as an input of production).

3) The price of Samsung mobile phones decreases (these phones are considered substitutes).

4) A new digital technology makes mobile phone production more efficient.

Answer 1

1.The study will cause the demand for iPhones to fall because of adverse effects of using mobile phones.

Demand curve shifts to the left reducing price and quantity.

2.An increase in an input price raises cost of production and shifts supply curve to the left, increasing price and reducing quantity.

3.The demand for Samsung phones will rise and demand for iPhones will fall because Samsung becomes relatively cheap.Demand curve for iphones shift to the left reducing price and quantity

4.An advancement in technology reduces cost of production,increasing supply and quantity and reducing price.