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Unformatted text preview: What side of the market bears relatively more of the economic price incidence? d) Suppose INSTEAD OF THE TAX, the mayor decides to enact a $10 per tire SUBSIDY on each tire sold. The mayor decides to send the subsidy payments to the suppliers of tires. Determine the new market equilibrium situation. Include the final price demanders now pay and the final price suppliers now receive. Why might the mayor want to do this? 2. Ophelia is a vegetable farmer in New York State. She prays to her God for a good crop every year. Unfortunately, her wish didn't come true this year, because a tornado destroyed 30% of everyone's crops in New York State. However, she still earned more revenue than she did last year. Assume that the demand for vegetables did not change. How could this have happened? Use demand-supply analysis and the elasticity concept to explain this paradox....
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- Fall '06