The government of Elbonia is concerned about its desperately poor cabbage farmers. They have hit upon the notion of a pr

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The Government Of Elbonia Is Concerned About Its Desperately Poor Cabbage Farmers They Have Hit Upon The Notion Of A Pr 1 (43.1 KiB) Viewed 21 times

The government of Elbonia is concerned about its desperately poor cabbage farmers. They have hit upon the notion of a producer subsidy. Knowing the analytical prowess of ABE 572 students, the government would like your help in analyzing the impact. We know the following: dQ Q dV Р ਲਤ ਲ 1 -1 1/8/n dP dV n , and E where P = the consumer price, n=-1.4, the elasticity of demand, ε = 0.3, the elasticity of supply, and dV/P = the producer subsidy as a percentage of the initial price. What can you tell the Elbonian agricultural minister about his proposed 10% subsidy? Specifically, a) How much of the subsidy will go to producers? and b) How much will go to consumers? c) What will the impact be on production and consumption of cabbage? d) Is this an efficient plan? (Can you think of a better one?)