Problem
In this chapter, we have focused on the effect of taxes on social welfare. However, governments also subsidize goods, or make them cheaper to buy or sell. How would a $2,000 subsidy on the purchase of a new hybrid vehicle impact the consumer surplus and producer surplus in the hybrid market? Use a supply and demand diagram to illustrate your answer. Does the subsidy create deadweight loss?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.