--%>
Assignment Help - homework help

Determine equilibrium quantity

Following equations denote market for widgets
Demand: P = 10 - Q Supply: P = Q - 4

Here P mentions the price in dollars per unit and Q mention the quantity in thousands of units. Assume the government has a change of heart regarding the importance of widgets to the happiness of the American public. The tax is eliminated and a subsidy of $1 per unit is granted to widget producers. Determine equilibrium quantity be? What price will the buyer pay? What amount per unit (by including the subsidy) will the seller attain? What will be the net cost to the government?
The original supply curve for widgets was P = Q - 4. Along with a subsidy of $1.00 to widget producers, the supply curve for widgets shifts outward. Remember that the supply curve for firm is its marginal cost curve. Along with a subsidy, the marginal cost curve shifts down by the amount of the subsidy. The new supply function is following:
                                                                           P = Q - 5.
To obtain the new equilibrium quantity, set the new supply curve equal to the demand curve:
                                                                           Q - 5 = 10 - Q, or Q = 7.5.
The buyer pays P = $2.50, and the seller attain that price plus the subsidy, that means, $3.50. Along with quantity of 7,500 and a subsidy of $1.00, the net cost of the subsidy to the government will be $7,500.

   Related Questions in Finance Basics

  • Q : Absolute and relative sizes of the

    Normal 0 false false

    		•
  • Q : Explain intermediation Explain

    Explain intermediation.The financial system makes it achievable for surplus and deficit economic units to come together, exchanging funds for securities, to their mutual profit. While funds flow from surplus economic units to a financial institu

    		•
  • Q : What do you mean by the term Year of

    Year of Appropriation (YOA): It refers to the initial year of an appropriation.

    		•
  • Q : What are Exempts Exempts : The state

    Exempts: The state employees exempt from civil service pursuant to the subdivision (e), (f), or (g) of Section 4 of Article VII of the California Constitution. Illustrations comprise department directors and some other gubernatorial appointees.

    		•
  • Q : Define the term Judgments Judgments :

    Judgments: It is generally refers to decisions made by courts against the state. The payment of judgments is subject to a range of controls and procedures.

    		•
  • Q : What is Enrolled Bill Report Enrolled

    Enrolled Bill Report (EBR): The analysis prepared on Legislative measures passed by both houses and passed on to the Governor, to give the Governor’s Office with information relating to the measure with a recommendation for action by the Governo

    		•
  • Q : Health finance 7.2 The audiology

    7.2 The audiology department at Randall Clinic offers many services to the clinic's patients. The three most common, along with cost and utilization data, are as follows: Service Variable Cost Annual Direct Annual # Visits per Service Fixed Costs Basic exam $5 $50,000 3,000 Advanced examination $7 $

    		•
  • Q : Near monies Normal 0 false false false

    Normal 0 false false

  • Q : Describe the importance of additional

    Normal 0 false false

  • Q : State Section 8.50 Section 8.50 : The

    Section 8.50: The Control Section of Budget Act gives the authority to raise federal funds expenses authority.

    		•