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