--%>
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 : Explain Conference Committee Conference

    Conference Committee: It is a committee of three members (that is two from the majority party and one from the minority party) from each house, appointed to gather and resolve differences among versions of a bill (example, when one house of the Legisl

    		•
  • Q : Describe accumulated depreciation

    Describe accumulated depreciation?Depreciation is the allocation of an asset's primary cost over time. Accumulated depreciation is the sum of all the depreciation cost that has been identified to date.

    		•
  • Q : Describe advantages and the

    Describe advantages and the disadvantages of new stock issue? A new stock issue increase funds and decreases the riskiness of the firm. This also tends to send a negative signal to the market as many investors believe a company would just sell

    		•
  • Q : Recognizes and state the significance

    Normal 0 false false

  • Q : Problem of time lags in enacting and

    Normal 0 false false

  • Q : Impact on India on Global Economic

    Explain the impact on India on Global Economic crisis ?

    		•
  • Q : Describe trustworthy collateral from

    Describe trustworthy collateral from the lenders' perspective? Describe whether accounts receivable and inventory are trustworthy collateral. Assets which are readily marketable, of stable value, and not likely to "disappear" make for trustwort

    		•
  • Q : Define Spot Bill Spot Bill : It is an

    Spot Bill: It is an introduced bill which makes non-substantive modifications in a law, generally with the intent to amend the bill at a later date to comprise substantive law modifications. This procedure gives a means for circumventing the deadline

    		•
  • 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 : Consumers advocates expressed concern

    Consumer's advocates expressed concern over such merger possibilities. Elucidate this statement.

    		•