2. Economics
3. the market for a medicine is in equilibrium at 80...

# Question: the market for a medicine is in equilibrium at 80...

###### Question details

The market for a medicine is in equilibrium at 80 thousand units a month. Each one is sold for $500. Suppose the own price elasticity of demand for this medicine is -0.8 and the price elasticity of supply is 1.5. a. Compute the slope and intercept coefficients for the linear supply and demand equations. b. If the government imposed a per unit subsidy of$40, what would be the new equilibrium price and quantity of this medicine?

c. Calculate and illustrate the changes in consumer, producer, and total surplus.