You are a serous Prof. Your analysis are so easy to understand and are straight forward. I learn a lot from your videos, and I must tell you , I am inspired by your work. Keep it up!
Sorry but "A" can not be a change in producer surplus, if it was already part of it from the start. The change in PS is the space the area beneath the price Pw, and between S' and S. This is fairly clear!
At price p1 (which is the pre-subsidy price), Q1 is the quantity produced---so revenue of P1xQ1. A is not part of producer surplus at that price,quanity combination. After the per-unit subsidy, quantity Q3 is produced with total revenue from market sales of Q3xP1. Firms receive A+B in subsidy payments. B is an additional marginal cost above and beyond the market revenue. So A is a indeed the increase in producer surplus inclusive of the subsidy payment.
No. "A" is part of the subsidy payment (presuming that all production receives the subsidy). The original production subsidy is not labeled in this graph. It was the triangle between the world price and the domestic supply curve.
I literally learn more from you than from my textbook and professor. THANK YOU!
Me too!!!!
You are a serous Prof. Your analysis are so easy to understand and are straight forward. I learn a lot from your videos, and I must tell you , I am inspired by your work. Keep it up!
Fantastic job
Thank you! I understand it now ;)
If a country has a free trade agreement, is government subsidy to their domestic production a violation of the agreement?
why supply curve would down?
Sorry but "A" can not be a change in producer surplus, if it was already part of it from the start. The change in PS is the space the area beneath the price Pw, and between S' and S. This is fairly clear!
At price p1 (which is the pre-subsidy price), Q1 is the quantity produced---so revenue of P1xQ1. A is not part of producer surplus at that price,quanity combination.
After the per-unit subsidy, quantity Q3 is produced with total revenue from market sales of Q3xP1. Firms receive A+B in subsidy payments. B is an additional marginal cost above and beyond the market revenue.
So A is a indeed the increase in producer surplus inclusive of the subsidy payment.
No. "A" is part of the subsidy payment (presuming that all production receives the subsidy). The original production subsidy is not labeled in this graph. It was the triangle between the world price and the domestic supply curve.
how has consumer surplus changed in all this ?
I should have started out by thanking you for this great video ! :)
Not affected. Price doesn't change because imports can be purchased without restriction==> no effect on consumers.
Thank you so much. Last question - If i wanted to put a number on that subsidy as a government outlay, could i say (Q3-Q1) x (P2-P1) ?