Solution-Solve for the equilibrium price and quantity

Solve for the equilibrium price and quantity

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Reference no: EM132488501

Telecommunication access is deemed to be an essential right in today's society. In line with this the government has decided to subsidize the purchase of mobile phones. The inverse demand for mobile devices is given by P = 500 - 0.1Q^D and supply is P = 200 + 0.1Q^S.

(a) Solve for the equilibrium price and quantity in this market, and calculate producer and consumer surplus.

(b) Suppose the government offers a $100 per unit subsidy to sellers of mobile devices. Alter the equation for the inverse supply curve to reflect the subsidy.

(c) With the subsidy in place, how many mobile devices will be sold? What will the price paid by buyers be? The price received by sellers?

(d) What will the subsidy program cost the government? What will the net effect of the subsidy on total surplus in society be?

Reference no: EM132488501

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Solve for the equilibrium price and quantity

Reference no: EM132488501

Reference no: EM132488501

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