Suppose that, in the market for litres petrol, demand is given
by P = 5 – 0.3Q, and supply is given by P = 1 + 0.1Q.
Further, suppose that the government provides a $1 per litre
subsidy for petrol.
A. Calculate the effect of the subsidy on the equilibrium price
and quantity.
B. Calculate the change in producer surplus and consumer surplus
that result from the provision of the subsidy.
C. Does total surplus to everyone in the economy...