More than 1.15 billion mobile phones were sold worldwide in 2007, a 16 percent increase in a year. Emerging markets, especially China and India, provided much of the growth as many people bought their first phone. Carolina Milanesi, research director for mobile devices at Gartner, reported that in mature markets, such as Japan and Western Europe, consumers’ appetite for feature-laden phones was met with new models packed with TV tuners, global positioning satellite functions, touch screens, and cameras.
a. Explain the effects of the increase in global demand for cell phones on the market for cell phones and on an individual cell-phone producer in the short run.
b. Draw a graph to illustrate your explanation in part (a).
c. Explain the long-run effects of the increase in global demand for cell phones on the market for cell phones.