given the following pair of demand and supply equations and subsidy per unit: p=

Question

given the following pair of demand and supply equations and subsidy per unit:

p= 7.5 - 0.25x     p= 2+2x+0.05x^2      s= 1.00

a. determine the equations of the new demand and supply functions after a subsidy of the given amount is granted

b. solve for the coordinates of the new equilibrium point

c. graph the pair of equations in (a) in one set of axes, indicating the coordinates of the equilibrium point. in the same graph, superimpose the graph of the original pair of equations, also indicating the coordinates of the equilibrium point

d. by how much does the equilibrium price per unit drop? what is the corresponding increase in equilibrium quantity

e. by how much does the consumer benefit from the subsidy? the supplier? what is the actual price at this equilibrium quantity level without the subsidy?

f. how much should be allotted for the total subsidy?

(note:subsidy is considered as a negative unit tax)

Explanation / Answer

the answer is:

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