Running Head: BUSINESS ECONOMICS Q.1: Use the following graph to answer parts A-C. A- What is true about the market of this good at the price of $4? Ans: Equilibrium of Supply and Demand: The equilibrium is established at the point where supply and demand curves intersect. The quantity supplied equals the quantity demanded at the equilibrium price. Here, the equilibrium price is $4 and at this price, 60 cups of coffee with cream are supplied and 60 cups coffee with cream are demanded. a. B- Suppose this demand and supply graph represents the market for cream. Draw a new graph below to show the effects on the cream market if there was damage to the Brazilian coffee crop. Ans: 1 2 B- Draw a new graph to show and analyze the impact of your events in the markets for "coffee houses," such as Starbucks. Ans: Q.2: Fill in the accompanying table, showing whether equilibrium price and equilibrium quantity go up, down or stay the same, or is indeterminate. No Change in Demand An Increase in Demand A Decrease in Demand No Change in Supply P same An Increase in Supply P down A Decrease in Supply P up Q same P up Q up P ambiguous Q down P up Q up P down Q up P down Q ambiguous P ambiguous Q down Q ambiguous Q down X---THE END---X