equilibrium price

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In the competitive market for gasoline in Newton, supply and demand are given by:

Qd = 4 – (1/3)*P

Qs = -1 + P

where Q is the number of thousands of gallons per day, and P is the price per gallon in dollars

a) Calculate the consumer surplus and producer surplus at the equilibrium.

b) Now, suppose that the government subsidizes gasoline by paying retailers $1.00 for each gallon sold.

What will be the new equilibrium price paid by consumers and quantity bought?

Calculate the deadweight loss, if any.

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