1.a State the "Law of Demand"5 pts

b Look at these graphs:

In graph 3 a higher price results in a higher quantity, in graph 4 a lower price results in a lower quantity. This means the "law of demand" is disproven.

1 Do you agree? Why or why not? 5pts

2. Let's say that the prevailing wage rate is $15. You(the Queen or King) are thinking of proposing a minimum wage of $20 or $10.

a. Is the $20 proposal a price ceiling or floor? Is the $10 proposal a price ceiling or floor?10 pts

b. Who is the buyer and seller? (demand curve, supply curve)?5pts

c. What would be the result of both policies. i.e.would this result in a surplus or shortage, and what would you call this?5pts.

3. Suppose that air pollution is a problem.

a. Describe a "cap and trade" policy as a possible solution8pts

b What, if any, externalities are addressed by this program. Include in your explanation whether these are positive or negative, and how the policy ameliorates them. &

c.What might be some drawbacks to this policy?+12 PTS

Your answers to the above should be complete enough to answer the question. You can use verbal, graphical, mathematical explanations in your answer. Your answer to #3 a, should be at least 50 words. You may use other sources, please note them. The text treatment of all the above is sufficient.