Question

I need help answering all parts to the questions below the table.

Paragraph Arrange Scenario 1 +1 Scenario 2 Scenario 3 +0.5 Scenario 4 +0.5 Scenario 5 +1.5 Scenario 6 +1.5 -1.5 -1.5 -0.5 -0.5 +0.25 +0.25 +0.37 +0.38 +0.12 +0.13 Supply slope Demand slope Change in Prod Price Change in Cons Price Change in Prod Surp Change in Cons Surp -0.25 -0.25 -0.12 -0.13 -0.37 -0.38 +12.47 +12.59 +9.39 +9.48 +9.32 +9.41 +12.47 +12.59 +3.13 +3.16 +27.95 +28.23 Discussion questions: 1) What is the role of producer vs consumer subsidies in a market? a. How do they differ in terms of impact? 2) What role does supply and demand (b and d) response play in determining how policy impacts are distributed between the supply and demand side of a market? a. Can you derive the mathematical relationship between incidence and response using the experiments recorded in the assignment table?

Answer 1

1) Subsidies are any financial assistance given to producer or Consumer.

The role of consumer subsidies- It lowers the price which is a benefit to consumer.It leads to increase in consumer surplus and expansion of demand.

The role of Producer subsidies- It lowers the burden on Producer as and increase the profit and supply.It also increases the producer surplus and revenue.

Both differ from each other as consumer subsidy increase the demand while producer subsidy increase the supply and there move on impacting the market differently.