Suppose that the market demand for solar energy is given by QD = 30 P where QD is quantity demanded and P is the market price. Market supply is given by QS = P where QS is quantity supplied and P is the market price.

(a) Find the equilibrium price and quantity in this market.

(b) What is the consumer surplus and producer surplus?

(c) Suppose that the government wants to increase the production and solar energy and decides to grant a $2 per unit subsidy aiming to reduce the effective price paid by the consumers (i.e. subsidy paid to consumers). What is new equilibrium posted price? How much of that price do consumers pay? What is the new market equilibrium quantity? What is the change in surplus for consumers? What is the change in surplus for producers?

(d) Suppose instead the government decides to pay the $2 subsidy to suppliers, which is received on top of the posted price for any unit of solar energy sold (i.e. subsidy paid to suppliers). What is the new equilibrium posted price? How much do the consumers pay for each unit of the good? What is the new market equilibrium quantity? How does consumer surplus and producer surplus compare to those in part (c)?

(e) What is the cost paid by the government to implement the policy in part (c) and (d)?