1. Market Equilibrium and Incidence of a Subsidy In the market for hazelnuts (Q, measured in...
1. Market Equilibrium and Incidence of a Subsidy
In the market for hazelnuts (Q, measured in kilograms), monthly demand is given by Qd(p) = 280,000 – 20,000p, and monthly supply by QS(p) = 5,000p – 20,000, where p is the price of a kg of hazelnuts (in €). Suppose the government introduces a subsidy (s) of €5/kg.
a) Find the equilibrium price received by producers before (p*) and after (ps**) the subsidy.
[Hint: A subsidy is just a negative tax, so in equilibrium we must have: ps** = pd** + s, where pd** is the new equilibrium price paid by consumers after the introduction of the subsidy]
Homework Answers
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1. Market Equilibrium and Incidence of a
Subsidy
In the market for hazelnuts (Q, measured in...
in a market for figs (Q, measured in kilograms) monthly demand and supply is given by:...
in
a market for figs (Q, measured in kilograms) monthly demand and
supply is given by:
market equilibrium price is p*= 12
market equilibrium quantity is q* = 40,000
a) compute the price elasticity of supply of figs and the
price elasticity of demand of figs at the equilibrium point.
b) do producers or consumers have the relatively less elastic
curve in this market?
QP (p) = 280,000 – 20,000p QS(p) = 5,000p – 20,000
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in
a market for figs (Q, measured in kilograms) monthly demand and
supply is given by:
market equilibrium price is p*= 12
market equilibrium quantity is q* = 40,000
a) compute the price elasticity of supply of figs and the
price elasticity of demand of figs at the equilibrium point.
b) do producers or consumers have the relatively less elastic
curve in this market?
QP (p) = 280,000 – 20,000p QS(p) = 5,000p – 20,000
The market demand and supply is described by the following equations QD = 250 - 2P QS 3P 1) Find the market equilibrium. 2) What is the CS, PS, and W in this market? 3) Assume that the government introduces a equilibrium? price ceiling of p = 15. What is the new 4) Find the change in CS, PS, and W. Is there Dead Weight Loss? if so, of how much? 5) What does this tell you about the welfare...
The market demand and supply is described by the following equations: Q = 100 - P Q=2P - 20 1) Find the market equilibrium 2) What is the CS, PS, and W in this market? 3) Assume that the government introduces a subsidy of 15$ per unit to the supply. What is the new equilibrium? 4) Find the change in CS, PS, and W. Is there Dead Weight Loss? if so, of how much?. 5) What does this tell you...
10.19. In a perfectly competitive market, the market demand curve is Qd = 10 -p, and the market supply curve is Q 1.5P a) Verify that the market equilibrium price and quantity in the absence of government intervention are Pd= P 4 and Qd Q 6. b) Consider two possible government interventions: (1)A price ceiling of $I per unit; (2) a subsidy of $5 per unit paid to producers. Verify that the equilibrium market price paid by consumers under the...
Question 39 1 pts Refer to Figure 4-2. Who carries the highest incidence of taxation in this market? Figure 4-2 The equations represent the demand and supply for silver pendants. The government is considering imposing a $4 per unit tax on buyers of silver pendants QD 50,000- 2000P QS -10,000+ 2000P QD (with tax) 50,000-2000(P+T) Producers Consumers C Government C Producers and Consumers have the same tax incidence
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