12. Understanding subsidies Suppose that in an attempt to protect its domestic toy industry, Canada's govermment subsidizes the production or consumption of domestically produced toys by giving each citizen a subsidy card. Each time citizens buy a domestically made toy, they swipe their cards and receive discounts of $8 off the price of a toy. The following graph represents the market for domestically made toys in Canada without any subsidy. Adjust the graph to show the effect of the $8 subsidy. 24 22 Supply 20 Demand 18 16 Supply 14 12 10 Demand 0 6 12 18 24 30 36 42 48 54 60 QUANTITY (Millions of toys per year) After the subsidy, the price producers receive is and the price paid by consumers is This subsidy program costs Canada's government PRICE (Dollars per a toy)
12. Understanding subsidies Suppose that in an attempt to protect its domestic toy industry, Canada's govermment subsidizes the production or consumption of domestically produced toys by giving each citizen a subsidy card. Each time citizens buy a domestically made toy, they swipe their cards and receive discounts of $8 off the price of a toy. The following graph represents the market for domestically made toys in Canada without any subsidy. Adjust the graph to show the effect of the $8 subsidy. 24 22 Supply 20 Demand 18 16 Supply 14 12 10 Demand 0 6 12 18 24 30 36 42 48 54 60 QUANTITY (Millions of toys per year) After the subsidy, the price producers receive is and the price paid by consumers is This subsidy program costs Canada's government PRICE (Dollars per a toy)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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macro question 12
The graph presents two lines:
- The **Supply** curve (orange line), which slopes upwards.
- The **Demand** curve (blue line), which slopes downwards.
On the graph:
- The horizontal axis represents the **Quantity** of toys (in millions per year).
- The vertical axis represents the **Price** of toys (in dollars per toy).
The intersection of the supply and demand curves indicates the equilibrium where the quantity demanded equals the quantity supplied.
**Instructions:**
After the subsidy, the price producers receive is [Blank], and the price paid by consumers is [Blank]. This subsidy program costs Canada's government [Blank].
---
### Explanation of Graph Components:
1. **Axes**:
- The horizontal axis (x-axis) shows the quantity of toys measured in millions per year.
- The vertical axis (y-axis) shows the price of toys per toy in dollars.
2. **Curves**:
- The **Demand curve** (blue line) slopes downward from left to right, indicating that as the price decreases, the quantity demanded increases.
- The **Supply curve** (orange line) slopes upward from left to right, indicating that as the price increases, the quantity supplied increases.
3. **Intersection Point**:
- The intersection of these two curves represents the market equilibrium without any subsidy, where the supply equals the demand.
To observe the effect of the $8 subsidy, there would be a shift in the demand curve or supply curve. The subsidy effectively lowers the price consumers pay by $8, shifting the equilibrium price and quantity.
**Fields to be filled:**
- **Price producers receive** after the subsidy.
- **Price paid by consumers** after the subsidy.
- **Cost to Canada's government** for this subsidy program.
This educational exercise provides insights into how subsidies impact market equilibrium, price received by producers, price paid by consumers, and the government's cost involved.
---
Please](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbec6bda3-9817-4809-86b8-e8ef7d890724%2Fc8dea720-ac09-416f-9e62-40e07780ff15%2Fxhl7nq4.png&w=3840&q=75)
Transcribed Image Text:### 1.2. Understanding Subsidies
Suppose that in an attempt to protect its domestic toy industry, Canada's government subsidizes the production or consumption of domestically produced toys by giving each citizen a subsidy card. Each time citizens buy a domestically made toy, they swipe their cards and receive discounts of $8 off the price of a toy.
The following graph represents the market for domestically made toys in Canada without any subsidy.
Adjust the graph to show the effect of the $8 subsidy.
The graph presents two lines:
- The **Supply** curve (orange line), which slopes upwards.
- The **Demand** curve (blue line), which slopes downwards.
On the graph:
- The horizontal axis represents the **Quantity** of toys (in millions per year).
- The vertical axis represents the **Price** of toys (in dollars per toy).
The intersection of the supply and demand curves indicates the equilibrium where the quantity demanded equals the quantity supplied.
**Instructions:**
After the subsidy, the price producers receive is [Blank], and the price paid by consumers is [Blank]. This subsidy program costs Canada's government [Blank].
---
### Explanation of Graph Components:
1. **Axes**:
- The horizontal axis (x-axis) shows the quantity of toys measured in millions per year.
- The vertical axis (y-axis) shows the price of toys per toy in dollars.
2. **Curves**:
- The **Demand curve** (blue line) slopes downward from left to right, indicating that as the price decreases, the quantity demanded increases.
- The **Supply curve** (orange line) slopes upward from left to right, indicating that as the price increases, the quantity supplied increases.
3. **Intersection Point**:
- The intersection of these two curves represents the market equilibrium without any subsidy, where the supply equals the demand.
To observe the effect of the $8 subsidy, there would be a shift in the demand curve or supply curve. The subsidy effectively lowers the price consumers pay by $8, shifting the equilibrium price and quantity.
**Fields to be filled:**
- **Price producers receive** after the subsidy.
- **Price paid by consumers** after the subsidy.
- **Cost to Canada's government** for this subsidy program.
This educational exercise provides insights into how subsidies impact market equilibrium, price received by producers, price paid by consumers, and the government's cost involved.
---
Please
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