Market in competitive equilibrium, the demand is the demand andsupply respectively are p = 100...

Market in competitive equilibrium, the demand is the demand and supply respectively are p = 100 - QD and p = 20 + (QS /3). The government introduces a subsidy of s = $4 per unit of the good sold and bought

Suppose the government is trying to determine the amount of subsidy (they think they can do better than s=$4), to maximize the equilibrium quantity transacted (bought and sold) in the market, yet it has a budget of $1500 to spend on the subsidy provision. What is the maximum quantity the government subsidy can induce, and what is the amount of subsidy per unit to achieve this?

Expert Solution

Rahul Sunny answered 2 years ago

Market in competitive equilibrium, the demand is the demand and supply respectively are p = 100...

Market in competitive equilibrium, the demand is the demand and supply respectively are p = 100 - QD and p = 20 + (QS /3). The government introduces a subsidy of s = $4 per unit of the good sold and bought Suppose the government is trying to determine the amount of subsidy (they think they can do better than s=$4), to maximize the equilibrium quantity transacted (bought and sold) in the market, yet it has a budget of $1500...

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