Demand is more elastic than the elasticity of supply

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a. Ford is given a subsidy, paid by consumers, for every car produced. Furthermore, the elasticity of demand is more elastic than the elasticity of supply. Who bears the cost of the subsidy? Show your work by using a graph.

b. Draw a supply and demand graph for a commodity tax on gasoline. Be sure to label price paid, price received, consumer surplus before the tax, consumer surplus after the tax, producer surplus before the tax, producer surplus after the tax, government revenue, and dead weight loss. The easiest way to do this is to use multiple colors or to label areas A, B, C, D, etc.

Reference no: EM131242409

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