Names: ______________________________      ______________________________

             ______________________________      ______________________________

  (1) Demand: Qd = 24 - 2Pb
 (2) Supply: Qs = -6 + 3Ps
 (3) Equil.: Qd = Qs
 (4) Tax:    Pb - Ps = t => Ps = Pb - 2.50

So we have 4 equations and 4 unknowns (Pb, Ps, Qd, Qs). Solving this system of equations yields:
   Pb = ______
   Ps = ______
   Qd = ______
   Qs = ______

To solve:
    Step 1: Use (3) to substitute for Ps in (2).
    Step 2: Use (4) to set Qs=Qd, and solve for Pb.
    Step 3: Insert Pb into (1) to solve for Q.
    Step 4: Insert Pb into (3) to solve for Ps.

 Checklist:
    ___     Label the new quantity, Pb and Ps in the diagram

         1. Impact on consumers:
    ___     Has consumer surplus (CS) gone up or down? ______
    ___     In the diagram use \\\ to label the change in CS
    ___     The size of the change in consumer surplus = ______

         2. Impact on producers:
    ___     Has producer surplus (PS) gone up or down? ______
    ___     In the diagram use /// to label the change in PS
    ___     The size of the change in producer surplus = ______
 
         3. Impact on government/taxpayers:
    ___     Does government receive (+) or spend (-) money? ____________
    ___     In the diagram use ||| to label the change in gov't revenue
    ___     The size of the impact on the government = ______
 
         4. Overall impact of the subsidy on social welfare:
    ___     change in CS + change in PS + change in government revenues
            = ______
    ___     Indicate where the welfare loss shows up in your diagram.