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From course:

Economics A Level (DONEEEEEEE)

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Question:

Show, using a Supply Demand Diagram, how the Total Gain that comes from a Subsidy is Split to a Producer Gain and Consumer Gain

Author: eric_galvao



Answer:

-The Total Consumer Gain [Blue] is that of the New Equilibrium Point, Equilibrium Price, Point that has same Q as Equilibrium but lies on the Old Price Level of the Old Equilibrium, and then the Old Equilibrium Price Level -Total Producer Gain [Pink] is that of the last 2 Points of the Consumer Gain, Point that has same Q as the Equilibrium [New one] but lies on the Old Supply Curve, and its respective Price Level


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