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, consumers pay price ____ and after the subsidy, consumers pay price ____. A) $2,000; $1,750 B) $2,000; $2,250 C) $2,250; $2,000 D) $1,750; $2,250

Question

Quizplus · Accepted Answer

Before the subsidy, to find the equilibrium price, set the supply and demand equations equal to each other: $5P - 5,000 = 15,000 - 5P$. Solving this equation gives $P = \$2,000$. After the subsidy, the effective price that suppliers receive is $P + \$500$. Adjust the supply equation to $5(P + 500) - 5,000 = 5P + 2,500 - 5,000$, which simplifies to $5P - 2,500$. Setting this new supply equal to the original demand, $5P - 2,500 = 15,000 - 5P$, solving gives $P = \$1,750$.

The Supply and Demand for Solar Panels Are Given by QS

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