Econ 1101 with Dr. Beck Exercise 4 The following pertains to our basic supply and demand model. Any principles of economics book will have coverage of this material. Additionally, a free, online treatment is available at: http://commonsenseeconomics.com/wp-content/uploads/2012/09/Demand-and-Supply-CSE-2010-w-Price-Controls-Reading.pdf 1) What is the "law of demand"? ___________________________________________________________________ ___________________________________________________________________ 2) What is our "ceteris paribus" assumption and why is it important? ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ In the following scenarios, consider the market for beer and use our supply and demand model to analyze the situation. For each, illustrate our supply and demand model and make a prediction about what will happen to the equilibrium price and quantity. An example is below. Note that the supply and demand curves can be dragged in this document. Questions 3-5 will involve you shifting a curve to receive credit. Example: The legal drinking age is reduced to 18. S Price D1 Quant of beer Equilibrium price will: ___increase__________ Equilibrium quantity will: ___increase__________ 3) The price of hops, an ingredient in beer, increases. Price Quant of beer Equilibrium price will:____________ Equilibrium quantity will:_____________ 4) Foreign firms begin exporting beer to the US in large quantities. Price Quant of beer Equilibrium price will:____________ Equilibrium quantity will:_____________ Now let's separate the