The supply and demand for solar panels are given by Q^S = 5P - 5,000 and Q^D = 15,000 - 5P, where P is price per solar panel and Q measures the quantity of solar panels. Suppose the government provides a $500 subsidy per solar panel. Before the subsidy, producers receive ____ and after the subsidy, producers receive ____. A) $2,000; $1,750 B) $2,000; $2,250 C) $2,250; $2,000 D) $1,750; $2,250

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Quizplus · Accepted Answer

Before the subsidy, the equilibrium price is found by setting QS equal to QD: $5P - 5000 = 15000 - 5P$. Solving for P gives $10P = 20000$, so $P = 2000$. After the subsidy, the supply equation becomes $5(P+500) - 5000 = 5P + 2500 - 5000$, or $5P - 2500$, because producers receive an extra $500 per panel. Setting the new supply equal to the original demand, $5P - 2500 = 15000 - 5P$, solving for P gives $10P = 17500$, so $P = 1750$. However, producers receive $P + 500 = 2250$ after the subsidy.

The Supply and Demand for Solar Panels Are Given by QS

The Supply and Demand for Solar Panels Are Given by Q^S