Question

The graph (on the other side) illustrates the market for cell phones.

Suppose the current price of a cell phone is ​$60 and
4 million cell phones a year are bought.

What do you predict will happen to the price of a cell phone​?

Answer 1

The price of cell phones is likely to increase to reach equilibrium in the market.

Step-by-step explanation:

In economics, the price of a product is determined by the interaction of supply and demand. Based on the information provided, if 4 million cell phones are bought at the current price of $60, it implies that the demand for cell phones at that price is higher than the supply. Therefore, to reach equilibrium, the price of cell phones is likely to increase in order to balance the quantity demanded and quantity supplied. For example, if the price of cell phones increases to $70, it might result in a decrease in the quantity demanded, while at the same time encouraging suppliers to increase the quantity supplied.

This adjustment process will continue until the market reaches a new equilibrium price.