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A Market Is Described by the Equations Qd = 100

Question 223

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A market is described by the equations Qd = 100 - P, and Qs = P. A subsidy of $10 is awarded to the seller of the product such that the new supply equation becomes Qs = (P + S). What is the quantity of nonbeneficial trades that take place in this market? What is the total cost of the subsidy for taxpayers? What is the total amount of the deadweight loss in this market as a result of the installation of the subsidy?

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100 – P = P + 10
90 = 2P
P = $45. So the...

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