The government believes that access to the internet is essential in todays society, and to bolster access, it proposes subsidizing the purchase of mobile devices. The inverse demand for mobile devices is
The inverse supply is given by
Solve for the equilibrium price and quantity in this market?
i) Calculate the consumer surplus.
ii)Calculate the producer surplus.
B) Find the elasticity of demand at the equilibrium?
C) Find the elasticity of supply at the equilibrium?
D) Calculate the share of the subsidy gained by consumers?
E) Calculate the share of the subsidy gained by producers?
F) Suppose the government offers a $70 per unit subsidy to sellers of mobile devices.
i) Compute the new inverse supply equation?
ii) What is the new price received by sellers?
iii) What is the new price paid by consumers?
iv) How many mobile devices are sold?
v) Calculate the consumer surplus after the subsidy?
vi) Calculate the producer surplus after the subsidy?
vii) Calculate the cost to the government which results from the subsidy?
viii) Calculate the deadweight loss due to the subsidy?
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