question archive The new Inflation Reduction Act includes a $7,500 tax credit (aka subsidy) to buyers for each new electric vehicle sold that was manufactured in the US
The new Inflation Reduction Act includes a $7,500 tax credit (aka subsidy) to buyers for each new electric vehicle sold that was manufactured in the US
Subject:BusinessPrice: Bought3
The new Inflation Reduction Act includes a $7,500 tax credit (aka subsidy) to buyers for each new electric vehicle sold that was manufactured in the US. Suppose the following supply and demand equations apply to the market for a Ford Mach-E, which is a US-manufactured electric vehicle that qualifies for the IRA tax credit. Ps = 44,000 + 3Q Pd = 49,000 - 2Qd With this information, answer the following four questions about this market for Ford Mach-E electric vehicles in the US. What is the equilibrium price and quantity sold for the Ford Mach-E before the IRA tax credit kicks in? With the subsidy, how much are buyers paying the dealership for each car? With the subsidy, how much are buyers saving in the net price for each car? (hint: you need the original price and the new net price) How much does it cost the government to support this subsidy?
