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The demand for A product is QD = 150-4P, while the supply is QS = 100...

The demand for A product is QD = 150-4P, while the supply is QS = 100 + P. What are the equilibrium price and quantity? If a subsidy of $5 per unit is imposed calculate the new equilibrium and the changes is consumer, producer and total surplus.

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Qs = lootp Qd = Iso- up In Equilibrium Iso-up =loot P Iso-100 = Ptup so =sp pinto Qd equation P = $10 Substituting @=150-4 (1OX 170-up = lootP 170-100 = ptup SP = 70 P = 70 Now P = $14 substituting pinto wood equatio New Qd = 17o-up! = 170 ~4(14) = 1

Price o 20 no to 80 100 110/120 140 160 180 Quantity P.S = 100 x (10-0) to.sx (11o-loo) (10-0) = 10olo to.sxlox 10 tso =1000T.S= $2,562.5 Aftea subsidy of $5. New C.S= Area of A (DIF) = 1 X BXH =0.5X114 x (42.5 -14) = 57*28.5 = $1,624.s is = Area ofin c.s = New c.S – old cos = 1624.5- 1512.5 = $112 (Increase ) A in p.S - New P.S- Old P.S. - loso = 1498 =uus (Increase , A

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