Sunday, April 3, 2016

Suppose the market for iPhone 6s 16GB is perfectly competitive?


Suppose the market for iPhone 6s 16GB is perfectly competitive. The market demand function is QD = 100000 - 100P, and the market supply function is QS = 10000 + 200P.
(a) Draw the demand curve and the supply curve in a graph.(b) What is the market equilibrium? What is the equilibrium price? What is the equilibrium quantity?
(c) Suppose the price of iPhone 6s 64GB increases. What will happen to the demand and the supply of iPhone 6s 16GB? What will happen to the equilibrium price and the equilibrium quantity?
(d) Suppose instead, the incomes of all potential buyers have increased such that at any given price they would like to double the quantity demanded for iPhone 6s 16GB. What will happen to the demand and the supply of iPhone 6s 16GB? What are the new equilibrium price and the new equilibrium quantity? Compare the new equilibrium with the original one.
(e) Suppose instead, the production technology for iPhone 6s 16GB has improved such that at any given price the quantity supplied is doubled. What will happen to the demand and the supply of iPhone 6s 16GB? What are the new equilibrium price and the new equilibrium quantity? Compare the new equilibrium with the original one.
(f) Suppose the situations in (d) and (e) happen at the same time. What will happen to the demand and the supply of iPhone 6s 16GB? What are the new equilibrium price and the new equilibrium quantity? Compare the new equilibrium with the original one.

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