One can gain insight by manipulating theprice elasticity of demandequation.With the information provided below, demonstrate what happens in the specific markets.

a.) Suppose there is a technological change that allows manufacturers to make Android smartphones much more cheaply. In fact, the retail price falls by 15%,ceteris paribus.

i) If the price elasticity of demand is -0.7, how much does the quantity demanded change?

ii) Are the producers definitely better off or worse off?

b.) In an alternative scenario,ceteris paribus, suppose there is a newtaxon data usage. The cum-tax monthly bill increases by 25%.

i) If the price elasticity of demand is -0.33, how much does the quantity demanded change?

ii) Do the data plan providers earn more revenue or less revenue?