There are 2 brands of cell phones that are almost identical except for some minor features: the A-Phone and the Pomegranate.

Part I

For this part of the assignment, we will focus on the demand curve. Draw the demand curve for the A-Phone showing how the demand curve will change if the following occurs:

1. There is an overall increase in income.

2. It is discovered that there are health concerns when using cell phones.

(There will be 2 graphs one for each scenario.)

Part II

For this part of the assignment, we will focus on the supply curve. Draw the supply curve for the A-Phone showing how it reflects on a graph if it becomes more expensive to produce cell phones as the input prices has gone up.

Part III

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 and set a price ceiling on a monthly cell phone bill. The price ceiling is below the equilibrium price.

What are the effects of government intervention in the cell phone market?(What happen to the equilibrium price, quantity demanded and quantity supplied) Is this a good thing for consumers?