Reference no: EM131189989

a. The market for cell phones is initially in equilibrium. Smart Phone introduces a new phone that provides radically improved services for consumers at the same time that the Federal government decides to implement an excise tax on cell phone producers. Describe the effect of these changes on the equilibrium price and quantity in this market. Assume that this new phone only affects consumers' tastes and preferences.

b. The market for bicycles is initially in equilibrium. The Surgeon General announces that a study has been done that indicates bicycling is a major contributor to good health for those who bicycle regularly. At the same time the price of gasoline increases due to political unrest in the major oil producing regions of the world. Describe the effect of these changes on the equilibrium price and quantity in this market.