Question

Suppose in a closed economy, the Ministry of Commerce decided to promote handicrafts

sector within the country. It took two measures of promotion. One, it ran a country wide

campaign and organised Handicrafts Mega-Mela in various cities in the country. Second, the

Ministry provided the latest tech-equipment to the producers of handicrafts at subsidised rate.

i. Show, with the help of a diagram, how the above two measures increase the equilibrium

quantity of handicraft products. What happens to the equilibrium price? Label before-

promotion equilibrium point as 0 and post-promotion equilibrium point as 1.​

Answer 1

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