Suppose the demand and supply are given by PD = 12-3QD and Ps =2Qs. What is the equilibrium price and quantity? a. Now suppose that the government gives $3 subsidy per unit of the good to the consumers. b. C. d. What is the new equilibrium under subsidy? (HINT: Think of subsidy as negative tax and how this would change the demand curve.) Calculate the "change" in consumer surplus and producer surplus as a result of the subsidy. Calculate the total cost by government (from paying the subsidy) and the deadweight loss.

Suppose the demand and supply are given by PD = 12-3QD and Ps =2Qs. What is the equilibrium price and quantity? a. Now suppose that the government gives $3 subsidy per unit of the good to the consumers. b. C. d. What is the new equilibrium under subsidy? (HINT: Think of subsidy as negative tax and how this would change the demand curve.) Calculate the "change" in consumer surplus and producer surplus as a result of the subsidy. Calculate the total cost by government (from paying the subsidy) and the deadweight loss.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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