A subsidy is the opposite of a tax. With a €0.50 tax on the buyers of ice cream cornets, the government collects

€0.50 for each cornet purchased; with a €0.50 subsidy for the buyers of ice cream cornets, the government pays buyers €0.50 for each cornet purchased.

a. Show the effect of a €0.50 per cornet subsidy on the demand curve for ice cream cornets, the effective price paid by consumers, the effective price received by sellers and the quantity of cornets sold.

b. Do consumers gain or lose from this policy? Do producers gain or lose? Does the government gain or lose?