Consider the market for tobacco for which demand and supply curves are as given below. In each case, quantity refers to thousands of boxes of tobacco per month and price is the price of tobacco per box (in dollars).

Demand Qd =17-0.1Pd

Supply Qs =12+0.5Ps

• 3.1 Compute the equilibrium price and quantity transacted in the market with no government intervention.
• 3.2 Now suppose that the government establishes a $10 subsidy per each box of tobacco produced to support domestic producers in the industry against world competitors.Show how this policy affects the market equilibrium. Calculate the new "consumer price" and "produce price."
• 3.3 Compute the total government expenditure as the result of implementing this policy.
• 3.4 Given your solutions in [3.3], what share of this expenditure is "paid" by consumers?
• 3.5 Given your solutions in [3.3], what share of this expenditure is "paid" by producers?