(Figure: Market for Child Care) Refer to the market for child care that is shown in the figure. The original equilibrium price is $10,000. A subsidy is now introduced for parents who pay for child care. After the subsidy is implemented, the amount that parents pay is:
A)$9,000.
B)$2,000.
C)$1,000.
D)$11,000.

Question

(Figure: Market for Child Care) Refer to the market for child care that is shown in the figure. The original equilibrium price is $10,000. A subsidy is now introduced for parents who pay for child care. After the subsidy is implemented, the amount that parents pay is: 
A)$9,000. 
B)$2,000. 
C)$1,000. 
D)$11,000.

Quizplus · Accepted Answer

With the subsidy, the demand for child care increases, shifting the demand curve to the right. This results in a new equilibrium at a higher price and quantity. The new price is $9,000, which is the amount that parents pay after taking into account the subsidy. Therefore, the best choice is A.

(Figure: Market for Child Care) Refer to the Market for Child