The Federal Government has, after consultation and research by health Canada, decided to promote the positive health effects of Canadian maple syrup. The plan includes step one, a nationwide advertising campaign promoting maple syrup as a healthy alternative to refined sugar. Step two is a decision to subsidize the production of syrup at a rate of $.50 per liter. The market price for syrup is $7.00. Assuming that the advertising campaign is memorable, what should happen to the demand for maple syrup and why? What should happen to the supply curve for maple syrup once the subsidy is in effect? What will happen to the equilibrium price. Draw a graph which shows the outcomes of these two steps.

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