--%>
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 : Define Subventions Subventions :

    Subventions: Typically employed to explain amounts of money expended as local assistance based on the formula, in contrast to grants which are provided selectively and frequently on a competitive basis. For the aim of Article XIII B, state subventions

    		•
  • Q : Define Referendum Referendum: This is

    Referendum: This is the power of the electors to support or reject statutes or parts of statutes, with particular exceptions and meeting particular deadlines and number of voter’s signatures.

    		•
  • Q : Clarify retained earnings and its

    Clarify retained earnings?  Describe importance of this? Retained earnings represent the sum of all the earnings available to common stockholders of a business at the time of its entire history, minus the tota

    		•
  • Q : Define CALSTARS CALSTARS : The acronym

    CALSTARS: The acronym for the California State Accounting and Reporting System that is the state's primary accounting system. Most of the departments presently use CALSTARS.

    		•
  • Q : Seasonal variations and secular trends

    Normal 0 false false

    		•
  • Q : Market share of large bank holding

    Have the large bank holding companies enhanced their market share at the cost of smaller institutions?No. A study conducted through the Federal Reserve Bank of New York reveals that the increase in the concentration of assets is primarily becaus

    		•
  • Q : Governments fiscal policy options for

    Normal 0 false false

  • Q : Explain Section 26.00 Section 26.00 :

    Section 26.00: It is a Control Section of Budget Act which gives the authority for the transfer of funds from one class, program or function in a schedule to the other category, program or function in the similar schedule, subject to particular limita

    		•
  • Q : What is Local Assistance Local

    Local Assistance (LA): The character of expenditures prepared for the support of local government or other locally administered actions.

    		•
  • Q : Question based on multiplier Normal 0

    Normal 0 false false