D: Q= (100/3) - (2/3)P
S: Q= -20 + 2P
Subsidy = 10
a) Solve for the original market clearing price P* and Quantity Q*
b) Calculate the price elasticity of demand at the initial price, P*
c) Calculate price elasticity of supply at the initial price, P*
d) On the basis of these two elasticity coefficients, anticipate the distribution of the burden/blessing of this tax
e) Concoct the new behavior (D' or S') that is most conducive to determining the consequences of this tax or subsidy. Express the new distorted schedule in both P' = and, after transposing in Q' form
f) Calculate the new prices and quantities-the new demand price Pd^T, new supply price Ps^T, and the new equilibrium quantity Q^T--resulting from governments corrective action
d) Graph the incident before and after the subsidy