Economics Homework Help

In an effort to encourage clean energy usage, suppose that the government offered a per unit subsidy (β) to

buyers in the market for roof-solar-panels in Cambonesia. Currently, the supply of solar panels in Cambonesia is constrained by its manufacturing capacity, but the government is confident that this problem will be reduced in the future with increased political and investment support. Using the information given, discuss the welfare implications of this subsidy in the market for roof-solar-panels in Cambonesia. Illustrate your analysis with appropriate diagrams. (You should consider the impact on consumers, producers, the government’s revenue or expenditure, and deadweight loss (if any), within the market.).

 The question specifically asks for welfare implications involving consumer surplus, producer surplus, government’s revenue or expenditure, deadweight loss, etc. To analyse these concepts, you should devise a suitable table to track your analysis.

 You should also sketch a matching graph to illustrate your demand-and-supply analysis.