Question

The inverse supply for coal is P^s=2+Qs. The inverse demand function for coal is P^d=20-2Q^d. By how much does the consumer surplus increases when a $3 subsidy to consumption is introduced? (Assume that no tax was in place before the subsidy is introduced.)

Answer 1

$P_s=P_d,$

$2+Q=20-2Q,$

$3Q=18,$

$Q_s=Q_d=6.$