Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 5.2, Problem 1ST
To determine
The impact of subsidy on the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Suppose the government of the island has decided to make tomatoes more affordable to consumers by imposing a fixed per unit subsidy.
Thus, start with the original demand (Qd = 50 – 5P) and supply (Qs = 5P – 25) and analyze this new intervention, the subsidy. The subsidy works like this: tomato sellers receive a $4 refund from the government for each kilogram of tomatoes they sell to consumers.
Write down the equation for the new "effective supply" curve.
Determine the new equilibrium quantity and equilibrium price.
What is the price that the consumers will pay for their tomatoes?
What is the price that the producers will effectively earn for their tomatoes, inclusive of the subsidy?
How much will the government spend on tomato subsidies in this case in total? (Recall the units of measurement: P is the price in dollars per kilogram of tomatoes; and Q is the quantity of tomatoes, expressed in thousands of kilograms.)
Produce a new graph depicting the new, post-subsidy equilibrium…
If a good is an "inferior good", then
people feel inferior when they buy it
people buy less of this good when their income increases
people buy more of this good when their income increases
the demand curve for this good is inferior to the demand curve of other goods
the drop down options are jeans and allergy medication
Chapter 5 Solutions
Microeconomics
Ch. 5.1 - Prob. 1STCh. 5.1 - Prob. 2STCh. 5.2 - Prob. 1STCh. 5.2 - Prob. 2STCh. 5.3 - Suppose college students are given two options....Ch. 5.3 - Prob. 2STCh. 5.4 - Prob. 1STCh. 5.4 - Prob. 2STCh. 5.5 - Prob. 1STCh. 5.5 - Prob. 2ST
Ch. 5.6 - Give an example to illustrate that someone may pay...Ch. 5.6 - Prob. 2STCh. 5.7 - Prob. 1STCh. 5.7 - Prob. 2STCh. 5.8 - Prob. 1STCh. 5.8 - Prob. 2STCh. 5.9 - Prob. 1STCh. 5.9 - Prob. 2STCh. 5.10 - Prob. 1STCh. 5.10 - Prob. 2STCh. 5.11 - Prob. 1STCh. 5.11 - Prob. 2STCh. 5.12 - Prob. 1STCh. 5.12 - Prob. 2STCh. 5 - Prob. 1QPCh. 5 - Prob. 2QPCh. 5 - Prob. 3QPCh. 5 - Prob. 4QPCh. 5 - Prob. 5QPCh. 5 - Prob. 6QPCh. 5 - Prob. 7QPCh. 5 - Prob. 8QPCh. 5 - Prob. 9QPCh. 5 - Prob. 10QPCh. 5 - Prob. 11QPCh. 5 - Prob. 12QPCh. 5 - Prob. 13QPCh. 5 - Prob. 14QPCh. 5 - Prob. 15QPCh. 5 - Prob. 16QPCh. 5 - Prob. 1WNGCh. 5 - Prob. 2WNGCh. 5 - Prob. 3WNGCh. 5 - Prob. 4WNGCh. 5 - Prob. 5WNGCh. 5 - Prob. 6WNG
Knowledge Booster
Similar questions
- If the demand for widgets is Qd = 90 - Pd and the supply of widgets is Q, = Ps - 30, what is the total surplus created at the equilibrium price? Also, draw the diagram and shade the appropriate area of the diagram.arrow_forwardThe demand function for a quantity of a certain good is D(g) = √/100-g², and the supply function is S(g) = q. The equilibrium quantity of the good is sold at the equilibrium price. Using geometry, find the total surplus (the sum of the producer surplus and the consumer surplus). Total surplus: Using geometry, find the producer surplus. Producer surplus: Using your previous two answers, find the consumer surplus. Consumer surplus: 用arrow_forwardIn the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of $5 per widget is imposed. As a result, the government is able to raise $750 per month in tax revenue. We can conclude that the equilibrium quantity of widgets has fallen by 25 per month. 50 per month.arrow_forward
- Is the following true: ‘the market demand function of a good will only be upward sloping if the good is a Giffen good for all the consumers in the market’? Explain.arrow_forwardConsider two markets: the market for coffee and the market for hot cocoa. The initial equilibrium for both markets is the same, the equilibrium price is $5.50, and the equilibrium quantity is 37.0. When the price is $8.75, the quantity supplied of coffee is 69.0 and the quantity supplied of hot cocoa is 101.0101.0. For simplicity of analysis, the demand for both goods is the same. Using the midpoint formula, calculate the elasticity of supply for hot cocoa. Please round to two decimal places.arrow_forwardGood A (an inferior good) and Good B (a normal good) are viewed by consumers to be substitute products. Suppose that the price of Good B falls at the same time that consumer income increases. What is the net effect of these two events on equilibrium in the market for Good A? an increase in equilibrium quantity and an indeterminate effect on price a decrease in both the equilibrium price and quantity an indeterminate effect on quantity but an increase in price an increase in both the equilibrium price and quantityarrow_forward
- Which of the following statements is/are true about inferior good? It is a good whose demand curve shifts leftward when the income of buyers increase and rightward when the income of buyers decrease. It is a good whose demand curve shifts rightward when the income of buyers increase and leftward when the income of buyers decrease. It is a good whose demand curve shifts leftward when the income of sellers increase and rightward when the income of sellers decrease. It is a good whose demand curve shifts leftward when the income of buyers decreases and rightward when the income of buyers increases.. Which of the following statements is/are true? Equilibrium is an unchanging situation in which all forces at work within a system are canceled by the other. The value of what must be forgone to undertake an activity is called opportunity cost. Supply curve is a graph showing the quantity of a good that buyers wish to buy at each price. The study of how people make choices under condition of…arrow_forwardNow, imagine that instead of the subsidy the UK government had responded to the cost-of-living crisis by subsidising both energy and food demand through a subsidy to producers resulting in a reduction of both energy prices and food prices by 10%. Using the same indifference curve of point a., what is the optimal level of consumption of energy following such intervention? How much of the change in quantity of each good consumed is due to an income effect and how much to a substitution effect? please could you answer this showing a diagram of the indifference curve movement. could you do food on the y axis and energy on the x axis.arrow_forwardSuppose the government of the island has decided to make tomatoes more affordable to consumers by imposing a fixed per unit subsidy. Thus, start with the original demand (Qd = 50 – 5P) and supply (Qs = 5P – 25) and analyze this new intervention, the subsidy. The subsidy works like this: tomato sellers receive a $4 refund from the government for each kilogram of tomatoes they sell to consumers. • Write down the equation for the new "effective supply" curve. • Determine the new equilibrium quantity and equilibrium price. • What is the price that the consumers will pay for their tomatoes? • What is the price that the producers will effectively earn for their tomatoes, inclusive of the subsidy? • How much will the government spend on tomato subsidies in this case in total? (Recall the units of measurement: P is the price in dollars per kilogram of tomatoes; and Q is the quantity of tomatoes, expressed in thousands of kilograms.) • Produce a new graph depicting the new, post-subsidy…arrow_forward
- Suppose the market demand for pizza is given by Q = 300 – 20P. The market supply, for pizza is given by Q = 20P – 100, where P = price (per pizza). Given the supply and demand equations given above complete the following table. Quantity Demanded (Q) Quantity Supplied (Q) Price (per pizza) $5.00 200 10.00 100 100 15.00 200 In equilibrium, pizzas would be sold at a price of S per pizza.arrow_forwardCan you please determine whether this statement is True or False, and explain why. Thank you Statement = "In order to be classified as a Giffen good, that good must be an inferior good. However, a good can be an inferior good but not a Giffen good."arrow_forwardSuppose the market for rum can be described by the following equations: Demand: P= 10- Q, Supply: P= Q - 4, where P is the price in US dollars per unit and Q is the quantity in thousands of units. Then: 3) suppose the government has a change of heart about the importance of rum to the public. the tax is removed and a subsidy of $1 per unit granted to rum producers. a) what will the equlibrium quantity be? b) what price will the buyer pay? c) what amount per unit (including the subsidy) will the seller recieve? d) what will be the total cost to the government?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning