Q4 The government of a small country is considering theintroduction of a unit subsidy on the production of organicmeat as its consumption has been proved to have healthbenefits. The effect following the introduction of the tax isshown in the graph below.Price per pound of organic meat£28S1£24£20£17DQuantity of pounds oforganic meat8,20010,50022,000 4. How will the unit subsidy affect the consumer surplus?Calculate the change in consumer surplus after the taxand explain the change. Show your workings andexplain your answer.

Consumer surplus is the dig=fference between the price that the consumers are willing to pay and the…

Answered: 4. How will the unit subsidy affect the…

4. How will the unit subsidy affect the consumer surplus? Calculate the change in consumer surplus after the tax and explain the change. Show your workings and explain your answer.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter3: Market Demand And Supply

Section3.A: Consumer Surplus, Proudcer Suplus, And Market Efficency

Problem 3SQP

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

The government of a small country is considering the
introduction of a unit subsidy on the production of organic
meat as its consumption has been proved to have health
benefits. The effect following the introduction of the tax is
shown in the graph below.
Price per pound of organic meat
£28
S1
£24
£20
£17
D
Quantity of pounds of
organic meat
8,200
10,500
22,000

4. How will the unit subsidy affect the consumer surplus?
Calculate the change in consumer surplus after the tax
and explain the change. Show your workings and
explain your answer.

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