C. d. 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
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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part C and D

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Suppose the demand and supply are given by Pp = 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.
Transcribed Image Text:Suppose the demand and supply are given by Pp = 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.
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