Question

12) The graph below shows the market for wine in the ancient Roman province of Potium.

Equilibrium is at E at the cross of demand (AB) and supply (GH). To win the gratitude of the

mob governor Fidelius subsidises the sales of wine. As a result, the quantity produced and sold

increases from QE to QS. Consumers pay the price PC per unit while producers receive PS per

unit sold.

a. Identify the cost of the subsidy for the treasury

b. By using the concepts of producer and
consumer surplus examine whether the subsidy
increases or decreases social welfare
(10%)
PE
PS
PC
S
E
QE
A
B
G
O
Price
Quantity
H
QS

Answer 1

Answer:

${21..28863 = < . \times \frac{?}{?} }^{?}$

Explanation:

wefhb