Subsidy is the opposite of a tax. With a $0.50 tax on the buyers of ice
creams the government collects $0.50 for each ice-cream purchased; with a $0.50

subsidy for the buyers of ice-creams, the government pays buyers $0.50
for each ice-cream purchased.

a. Show the effect of a $0.50 subsidy per ice-cream on the demand curve for
ice-creams,the effective price paid by consumers, the effective price
received by sellers and the quantity of ice-creams sold.

b. Do consumers gain or lose from this policy? Do producers gain or lose?
Does the
government gain or lose?