Graph the following In the market for smartphones, the price elasticity of supply is +0.8, and the price elasticity of demand is -1.2. At equilibrium, price is $800 and quantity is 400000. (1a) Assuming supply and demand are linear, reconstruct and draw the supply and demand curves. Label the intercepts. (1b) To help consumers and phone-makers, the government proposes to subsidize smartphones by $80 each. What are PB and PS after the subsidy? What is the new equilibrium quantity? Illustrate them on the same graph. (c) Calculate the change in consumer surplus, producer surplus, government expenditure, and deadweight loss and identify them on the graph.
Graph the following
In the market for smartphones, the price elasticity of supply is +0.8, and the
(1a) Assuming
(1b) To help consumers and phone-makers, the government proposes to subsidize smartphones by $80 each. What are PB and PS after the subsidy? What is the new
(c) Calculate the change in
Given:
The price elasticity of supply = +0.8,
The price elasticity of demand = -1.2
At equilibrium, the price = $800 and the quantity = 400000
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