Price MC, =S Ds D Quantity Figure 10 Demand and supply curves Towards the right of Figure 10 are two circular red markers with a line between them that you can use to draw a MCp – subsidy curve on Figure 10. You can move the markers with the mouse by clicking on them and dragging. Alternatively, you can tab to each marker and then use the keyboard arrow keys. A report from Cycling England has suggested that a £70m investment in cycling each year could save the government £520m per year. The savings result from the positive benefits of increased cycling - lower carbon dioxide emissions and lower NHS costs as we become healthier. These positive consumption externalities are shown in the diagram below by the demand curve Ds. This is the level of demand society would prefer at each price once the externalities are recognised. The government decides to subsidise the production of bikes to encourage consumption of cycling. Move the markers to drag the line to the correct place on the diagram to show how a producer subsidy can lead to the socially optimal level of cycling.

Price MC, =S Ds D Quantity Figure 10 Demand and supply curves Towards the right of Figure 10 are two circular red markers with a line between them that you can use to draw a MCp – subsidy curve on Figure 10. You can move the markers with the mouse by clicking on them and dragging. Alternatively, you can tab to each marker and then use the keyboard arrow keys. A report from Cycling England has suggested that a £70m investment in cycling each year could save the government £520m per year. The savings result from the positive benefits of increased cycling - lower carbon dioxide emissions and lower NHS costs as we become healthier. These positive consumption externalities are shown in the diagram below by the demand curve Ds. This is the level of demand society would prefer at each price once the externalities are recognised. The government decides to subsidise the production of bikes to encourage consumption of cycling. Move the markers to drag the line to the correct place on the diagram to show how a producer subsidy can lead to the socially optimal level of cycling.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand And Government Policies

Section: Chapter Questions

Problem 2PA

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