Suppose an economy with the following supply and demand: Qs = 30p
Qd =300-20p
- Find the equilibrium price and quantity in this economy
- The government thinks that the price this good is too high, so it imposes a price equal to 4. What is the quantity supplied and demanded? What is the deadweight loss? Explains what would happen in this economy.
- After failing with its first policy, the government decide to subsidy the demand in order to get a price equal to 4. The government will give a fix amount in order to move the supply curve and achieve a price equal to 4. What is the subsidy that reaches government's objective? What is the total cost for the government? What is the deadweight loss?