4. Consider the market for 1M car motor oil in Malaysia. The demand and supply functions...

4. Consider the market for 1M car motor oil in Malaysia. The demand and supply functions are given as follows: where the price, p is in RM and q, the quantity is in litres. A price subsidy, s, of RM10.00 per litre is provided by the government on the good. Determine: a. The market equilibrium before subsidy. (5 pts) b. The after subsidy equilibrium price and quantity. (10 pts) c. The excess burden of the subsidy. (3 pts) d. The subsidy expenditure. (2 pts) e. What is your thought on this subsidy. (5 pts)

S = p = 25 + q/550

D = p = (4800-q)/100

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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