Economics · Oct / Nov 2016 · Paper 12 · Question 19

A government gives farmers a subsidy of $5 per kilo to supply food on the open market where X is the original equilibrium position. The effect is illustrated in the diagram. What will be the new equilibrium price and quantity supplied as a result of the subsidy?

1. Aequilibrium price 10, quantity supplied 16
2. Bequilibrium price 13, quantity supplied 20
3. Cequilibrium price 15, quantity supplied 16
4. Dequilibrium price 20, quantity supplied 8

As printed in the paper