a) Draw a standard S & D graph for a competitive market. It will be the basis for a series of competitive market questions. b) Below, redraw your graph from (a). Suppose the government decides to subsidize the suppliers by directly giving producers a payment of s for each unit they produce. Add this subsidy to your graph. Highlight/shade the new equilibrium levels of price, quantity, CS, and PS. Shade any inefficiency area. c) Below, redraw your graph from (a). Now suppose there’s a 2nd source of demand in the form of a foreign demand curve DF. Add DF to your graph below, determine the new total demand curve, determine the new equilibrium, and show how the new equilibrium quantity is divided between domestic and foreign buyers.
a) Draw a standard S & D graph for a competitive market. It will be the basis for a series of competitive market questions.
b) Below, redraw your graph from (a). Suppose the government decides to subsidize the suppliers by directly giving producers a payment of s for each unit they produce. Add this subsidy to your graph. Highlight/shade the new equilibrium levels of price, quantity, CS, and PS. Shade any inefficiency area.
c) Below, redraw your graph from (a). Now suppose there’s a 2nd source of
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 3 images
