Question 6

Consider the market for Samsung's new Galaxy phone. The supply and demand schedules for Galaxy are given by the equations below. In addition to solving this problem algebraically, provide graphs. All graphs can be displayed on the one set of coordinates be10w. 3P=5Q+39 and P=45-Q a. Find the equilibrium price and quantity levels in market for Surfaces. Grading: equilibrium price 0.5 equilibrium quantity 0.5 graph, including all labels 0.5 b. Suppose that there is a new technology that reduces the cost of manufacturing of the Galaxy by $8. Find the new equilibrium. Add new relevant curve(s), and new equilibrium price and quantity to the graph above. Grading: New equilibrium 1 point; graph - 0.5 point c. Suppose that after the new Apple iPhone is introduced, a substitute for the Galaxy, the market quantity of Galaxy phones returns to the initial quanu'ty level (i.e., the quantity you found in part (a)). What's the equilibrium pn'ce of a Galaxy now? Grading: The equilibrium price is correct 1 point