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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:

  1. before the subsidy
  2. after the subsidy

Question 7

Calculate consumer expenditure:

  1. before the subsidy
  2. after the subsidy