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[問題] Econ (About CS and PS)

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Econ (About CS and PS)

It's one of the exam questions of my school and i don't understand the answer.
The government sets up a price ceiling but it's not mention in the answer. Can anyone explain the diagram to me? Thanks a lot.
Attach please find the document below
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TOP

help. Can anyone tell me whether the answer is wrong or it's my misunderstand to the question?

TOP

The wordings in the question is quite confusing @_@.

The question says : The price ceiling is set at "the market price under the subsidy"
This actually refers to the eqm price when the subsidy is in place.
It is indicated as P1 in the marking scheme but it didn't draw a solid line to represent the ceiling. Try drawing one yourself on paper and do it again. It'll make things clearer.

Note that If there were no price ceiling at P1, the current price would have been at the level where D intersects S1, which is not what is shown in the answer.

So, the marking is correct but its presentation is... hard to understand. What exercise is this ?

On another note , both a subsidy and a price ceiling keeps the price level low, both can do that. But the question tries to investigate the effect on TSS(=CS+PS) of each of them. The conclusion is, of course, TSS is greater when a subsidy is used, rather than a ceiling.

I hope my interpretation helps



TOP

thanks a lot. I understand now
It's one of the questions in the past paper of my school. I just copy the question and answer out. Thanks a lot

TOP

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