Question
2 The question bolded is what I need help with. The supply curves of three branches of Great Power are given by the following equations:
2 The question bolded is what I need help with.
The supply curves of three branches of Great Power are given by the following equations:
i. Q1 = - 200 + 2P
ii. Q2 = - 500 + 2.5P
iii. Q3 = - 1000 +2P
Where Q is the quantity (in 1000s of electric kilowatts) supplied, and P is the price per kilowatt.
The demand curves of three companies that consume electricity from the three branches of Great Power are given by the following equations:
i. Q1 = 4000 -2P
ii. Q2 = 3000 - 3P
iii. Q3 = 600 - 2P
K. How much does the government spend on the subsidy?
L. How do consumer and producer surpluses change due to the subsidy?
M. What is the deadweight loss associated with the subsidy?
N. As a public manager, advise the government about whether or not to keep/increase/decrease the subsidy. Base your advice on the criterion of (i) allocative efficiency and (ii) the elasticity of demand and supply curves in the graph.
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