Answer to Question #42703 in Microeconomics for JoJo

Question #42703

Suppose the market for school education can be described by the following equations.

P =1 00 000 - 2Q and P = -20 000 + Q

Where P is price in dollars and Q is number of students in thousands. Now suppose the government pays a subsidy o $10 000 per student.

(a) Calculate the equilibrium price and the number of students in a free market.
(b) With the subsidy what price the student will pay? What price the schools will receive per student? What will be the number of students in schools?
(c) What will be the total cost to the government?
(d) Show your results in a diagram.

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