Per Unit Subsidy
This Demonstration illustrates the per unit subsidy model; you can vary demand, supply elasticity slopes, and subsidy size. You can choose to display consumer, producer, subsidy total, and deadweight loss. The Demonstration also calculates total subsidy, deadweight loss, the percent of the subsidy that goes to consumers, the amount that goes to suppliers, and the amount that demanders pay.
Define the following variables:
elasticity of demand
elasticity of supply
per capita subsidy
Subsidized quantity equals subsidy equals supply minus demand .
Subsidy total equals ; deadweight loss equals . Percent to consumers is determined by dividing the difference of equilibrium price and what consumers pay times by the total subsidy.
Consumer surplus is illustrated by the blue triangle; producer surplus is illustrated by the red triangle; subsidy total is illustrated by the green rectangle; and deadweight loss is illustrated by the black triangle. All of these may be enabled in any combination. The price consumers pay is in blue on the left. The price sellers receive is in red on the left.