Suppose there is a $3.00 per unit subsidy given to consumers. Draw the after-subsidy demand curve.

a. Suppose there is a $3.00 per unit subsidy given to consumers. Draw the after-subsidy demand curve.

Instructions: Use the tool provided (S2) to draw the after-subsidy demand curve. Be sure your endpoints are at Q = 0 and Q = 180.

b. Plot the after-subsidy price paid by consumers and the after-subsidy price received by sellers. Instructions: Use the tools provided to draw the after-subsidy price paid by consumers (After-subsidy Pc) and the after-subsidy price received by sellers (After-subsidy Ps).

c. Draw the deadweight loss after the subsidy, Instructions: Use the tool provided to draw deadweight loss (DWL).

d. Deadweight loss is million.

Solutions

Expert Solution

Solution

B) Price level is $10 and Quantity is 100 million

Dead Weight Loss = (11-8) x 80 = $240 million

Rahul Sunny answered 2 years ago

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