## Calculating impact of a subsidy - numerical

Assume a linear demand function of the form:

**Qd = 160 - 10P**

and a linear supply curve of the form:

**Qs = -40 + 15P**

Using these demand and supply functions, answer the following questions.

#### Question 1

Calculate the quantities demanded and supplied for prices from $1 - $15.

#### Question 2

Plot these figures to give the demand and supply curves for the product.

#### Question 3

Using simultaneous equations, calculate the equilibrium price and output.

#### Question 4

If the government gives a subsidy per unit of $5, plot the new supply curve on the original supply and demand diagram. Use the diagram to find out the new equilibrium price and quantity.

#### Question 5

Calculate the amount spent by the government on the subsidy.

#### Question 6

Calculate the revenue received by the firms:

- before the subsidy
- after the subsidy

#### Question 7

Calculate consumer expenditure:

- before the subsidy
- after the subsidy