Table of contents

1. Introduction to Macroeconomics1h 57m
2. Introductory Economic Models59m
3. Supply and Demand3h 43m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Price Floors3h 40m
6. Introduction to Taxes1h 25m
7. Externalities1h 3m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. Introducing Economic Concepts49m
11. Gross Domestic Product (GDP) and Consumer Price Index (CPI)1h 37m
12. Unemployment and Inflation1h 15m
13. Productivity and Economic Growth1h 17m
14. The Financial System1h 37m
15. Income and Consumption52m
16. Deriving the Aggregate Expenditures Model1h 22m
17. Aggregate Demand and Aggregate Supply Analysis1h 18m
18. The Monetary System1h 1m
19. Monetary Policy1h 32m
20. Fiscal Policy1h 0m
21. Revisiting Inflation, Unemployment, and Policy46m
22. Balance of Payments30m
23. Exchange Rates1h 16m
24. Macroeconomic Schools of Thought40m
25. Dynamic AD/AS Model35m
26. Special Topics11m

6. Introduction to Taxes

Subsidies

Macroeconomics

6. Introduction to Taxes

Subsidies

Previous problemNext problem

Struggling with Macroeconomics?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

A government wants to increase the use of solar panels by offering a $100 subsidy for each solar panel purchased. The addition of this subsidy will:

Increase the quantity supplied

Decrease the quantity supplied

Create a deadweight loss in the market for solar panels

Both (a) and (c)

Previous problemNext problem

Verified step by step guidance

Understand the concept of a subsidy: A subsidy is a financial incentive provided by the government to encourage the production or consumption of a good. In this case, the government offers a $100 subsidy for each solar panel purchased.

Analyze the effect of the subsidy on the supply curve: A subsidy effectively lowers the cost of production for suppliers, which typically shifts the supply curve to the right, indicating an increase in the quantity supplied at each price level.

Consider the impact on market equilibrium: With the supply curve shifting to the right, the new equilibrium will have a higher quantity of solar panels supplied and sold, assuming demand remains constant.

Evaluate the potential for deadweight loss: A subsidy can lead to overproduction, where the quantity of solar panels produced exceeds the socially optimal level. This can create a deadweight loss, which is an inefficiency in the market where total surplus (consumer plus producer surplus) is not maximized.

Conclude by identifying the correct outcomes: The subsidy increases the quantity supplied and can create a deadweight loss due to overproduction, confirming that both (a) and (c) are correct.