Ex 1

D(p)=13 2.5p

O(p)= 1.5p + 1

2- The government decides to offer companies a subsidy worth 1.5 dollars for each unit produced and sold. a) What will be the impact on the equilibrium price and quantity? b) Supply is less elastic than demand, true or false? Why? c) With regard to the elasticity of the supply and demand curves, which of the buyers and vendors would benefit the most from the subsidy? d) Calculate and graph the impact of the subsidy on buyers e) Calculate and graph the impact of the subsidy on vendors f) What is the total expenditure of the grant for the government? g) Calculate and represent on a second graph the change in the surplus of the consumer. What is the total consumer surplus after granting the grant?