Question

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.

Answer 1

Solution

A)

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

C)

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