(Figure: Market for Reusable Jute Shopping Bags) Refer to the market for reusable jute shopping bags that is shown in the figure. The original equilibrium price is $7 per bag. A subsidy is now introduced for buyers of the bags. As a result of the subsidy, the equilibrium quantity in the market _____ by _____ units.

Question

Quizplus · Accepted Answer

A subsidy for buyers shifts the demand curve to the right, leading to a new equilibrium with a higher quantity and a lower price. The equilibrium quantity in the market rises by the amount of the increase in demand, which is 1,000 units in this case. Therefore, the correct answer is (C) rises; 1,000.

(Figure: Market for Reusable Jute Shopping Bags) Refer to the Market