Consider a perfectly competitive market with inverse market supply $P = 5 + 3 Q ^ { s }$ and inverse market demand $P = 50 - 2 Q ^ { d }$ . Suppose the government subsidizes this market with a subsidy of $5 per unit. What is the equilibrium quantity traded after imposition of the subsidy?
A) Q = 10
B) Q = 12.5
C) Q = 9
D) Q = 7.5

Question

Quizplus · Accepted Answer

With a subsidy of $5, the supply curve shifts down by $5, becoming $P = 0 + 3Q^s$. Setting the new supply equal to demand: $0 + 3Q = 50 - 2Q$, solving gives $Q = 10$.

Consider a Perfectly Competitive Market with Inverse Market Supply P=5+3QsP = 5 + 3 Q ^ { s }P=5+3Qs

Consider a Perfectly Competitive Market with Inverse Market Supply $P = 5 + 3 Q ^ { s }$