Question
Suppose the government of the island has decided to give consumers a more attractive price for tomatoes by imposing a fixed, per unit subsidy. Thus,
Suppose the government of the island has decided to give consumers a more attractive price for tomatoes by imposing a fixed, per unit subsidy.
Thus, start with the original demand (Qd = 1200 - 100P) and supply (Qs = 100P) and analyze this new intervention, the subsidy. The subsidy works like this: each tomato seller receives a 2 dollar refund for each tomato sold.
how to figure out the equation for the new "effective supply" curve with quantity and price
What is the price that the consumers will pay for their tomatoes? What is the price that the producers will effectively earn for their tomatoes, inclusive of the subsidy?
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Principles of economics
Authors: N. Gregory Mankiw
6th Edition
978-0538453059, 9781435462120, 538453052, 1435462122, 978-0538453042
