The local government has decided that because children's health has large external benefits, it will offer a subsidy to help families pay for visits to the pediatrician.However, the government isn't sure at what level to set the subsidy. The figure below shows the current demand curve for pediatricians' visits (D₁), and three alternativesubsidies, represented by curves D2, D3. and D4-Price (S)240220-200-180-160-140-120-80-60-40-20-0Quantity of pediatrician visitsD₂resetD₂D₂50 100 150 200 250 300 350 400 450 500D₁D₂a. Assume that the correct level of subsidy is D3. Compared to the efficient outcome, graph the loss in total surplus that would result from subsidies D₂ and D4Instructions: Use the tools provided (D₂ and D4) to draw the loss in total surplus for each subsidy.b. The socially optimal level of pediatrician visits is350 visits.

A positive externality, in economics, occurs when an economic activity or transaction generates…

Answered: The local government has decided that…

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter19: Elasticity

Section: Chapter Questions

Problem 9QP

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Energy markets, such as the market for natural gas and electricity, have been known to be characterized by inelastic demand. However, recent research discussed in the August 25, 2022 issue of The Economist, indicates that while the responsiveness of quantity demanded in response to price changes indeed is “inelastic” (i.e., the absolute value of price elasticity of demand is still less than 1), the percentage change in quantity demanded in response to a change in price is much larger than earlier research indicated. Answer these narrative questions. No graphs are needed. What does “inelastic demand” formally mean? In addressing this part of the question, please make sure to explain the concept of the price elasticity of demand using a simple formula and by providing a short narrative. Policymakers are encouraging people to conserve energy in response to the growing energy crisis. Discuss the positives (pros) and negatives (cons) of providing subsidies to consumers in this situation…
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Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per room) 500 450 400 350 300 250 200 150 100 50 0 0 Demand 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Graph Input Tool Market for Oceans's Hotel Rooms Price (Dollars per room) Quantity Demanded (Hotel rooms per night) Demand Factors Average Income (Thousands of dollars) Airfare from PIT to ACY (Dollars per roundtrip) Room Rate at Meadows (Dollars per night) 400 100 50 250 200 ?
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