39 ### Transcription for Educational Website#### Graph ExplanationThe provided graph illustrates the concepts of supply and demand in a market. - **Axes:** The vertical axis represents 'Price', while the horizontal axis represents 'Quantity'.- **Supply and Demand Lines:** - **S₁** and **D₁**: Represent the current market supply and demand, respectively. - **S₂** and **D₂**: Indicate the socially optimal supply and demand.#### Key Points on the Graph- **Intersection Points:** - **Current Market Equilibrium** is at the intersection of S₁ and D₁. - **Socially Optimal Equilibrium** is found at the intersection of S₂ and D₂.- **Price Levels:** - Price level at different points is indicated with letters (E, F, G, H, I, J).- **Quantity Levels:** - Quantity levels corresponding to different equilibriums are marked as A, B, C.#### Government InterventionTo shift supply to its socially optimal level, the government can consider the following actions:- **Regulate the production of the good.**- **Provide the product.**- **Subsidize the buyers.**- **Tax the sellers.**These interventions are methods to align the market supply with the socially optimal supply, represented by S₂ on the graph.

Given that S1 and D1 are the supply curve and demand curve respectively. S2 and D2 represents the social optimal supply and demand curve.Supply curve S2 is in the right shift of the supply curve. In order to shift the supply curve to social optimal curve, government should produce the product If government provide subsidies to the buyers then it will shift demand curve to upward. And if government put tax on producers then it will reduce the supply and shift the supply curve left to S1 So option B is correct.

Business

Economics

S1 S2 D2 F D1 E A Quantity Refer to the provided supply and demand graph. S, and D, represent the current market supply and demand, respectively. S2 and D represent the socially optimal supply and demand. One way that the government could shift supply to its socially optimal level is to regulate the production of the good. provide the product. Price

S1 S2 D2 F D1 E A Quantity Refer to the provided supply and demand graph. S, and D, represent the current market supply and demand, respectively. S2 and D represent the socially optimal supply and demand. One way that the government could shift supply to its socially optimal level is to regulate the production of the good. provide the product. Price

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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