If a subsidy is provided for the consumption of good X, and the subsidy is different for different units of good X (e.g., $40 subsidy on the first unit of good X and $32 on the second unit of good X,...

If a subsidy is provided for the consumption of good X, and the subsidy is different for different units of good X (e.g., $40 subsidy on the first unit of good X and $32 on the second unit of good X, etc.), would the demand curve without a subsidy be parallel to the demand curve with a subsidy, as is the case in Exhibit 1? Explain your answer. Suppose a subsidy is provided to the buyers of solar panels. What is likely to happen to the price of solar panels? Explain your answer.

May 18, 2022
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