Microeconomics

Table of Contents

1. Topic pack - Microeconomics - introduction
2. 1.1 Competitive Markets: Demand and Supply
3. 1.1 Competitive Markets: Demand and Supply - notes
4. 1.1 Competitive markets - questions
5. 1.1 Competitive markets - simulations and activities
6. 1.2 Elasticities
7. 1.2 Elasticities - notes
8. Section 1.2 Elasticities - questions
9. Section 1.2 Elasticities - simulations and activities
10. 1.3 Government intervention
11. 1.3 Government Intervention - notes
    1. The impact of taxation
    2. Tax revenue
    3. Tax incidence
    4. Calculating effects of a specific tax
    5. Calculating impact of a tax - example
    6. The impact of subsidies
    7. Calculating effects of a subsidy
    8. Calculating effect of a subsidy - example
    9. Price controls
    10. Price ceilings
    11. Calculate effects of price ceiling
    12. Calculating effect of a price ceiling - example
    13. Price floors
    14. Calculate effects of price floor
    15. Calculating effect of a price ceiling - example
    16. Intervention in agricultural markets
    17. Common Agricultural Policy
12. 1.3 Government intervention - questions
13. 1.3 Government intervention - simulations and activities
14. 1.4 Market failure
15. 1.4 Market failure - notes
16. Section 1.4 Market failure - questions
17. Section 1.4 Market failure - simulations and activities
18. 1.5 Theory of the firm
19. 1.5 Theory of the firm - notes (HL only)
20. Section 1.5 Theory of the firm - questions
21. Section 1.5 Theory of the firm - simulations and activities
22. Print View

Calculating effect of a subsidy - example

Assume a linear demand function of the form:

Qd = 120 - 5P

and a linear supply curve of the form:

Qs = -30 + 10P

Using these demand and supply functions, answer the following questions. Once you have had a go at the questions, follow the link below to compare your answers.

1. Calculate the quantities demanded and supplied for prices from $3 - $15.
2. Plot these figures to give the demand and supply curves for the product.
3. Using simultaneous equations, calculate the equilibrium price and output.
4. If the government gives a subsidy per unit of $3, plot the new supply curve on the original supply and demand diagram.
5. Use the diagram to find out the new equilibrium price and quantity.
6. Calculate the amount spent by the government on the subsidy.
7. Calculate the revenue received by the firms:
   1. before the subsidy
   2. after the subsidy
8. Calculate consumer expenditure:
   1. before the subsidy
   2. after the subsidy

• Possible answers