A-LevelEconomicsGovernment microeconomic intervention9708/12 · Oct/Nov 2013 · Q181 Mark
In the diagram, D is the demand curve for a commodity. S₁ and S₂ are the supply curves before and after an intervention by the government. [Figure 18.1] What action has the government taken?
This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.
AIt has given producers a subsidy to encourage greater output.
BIt has given a subsidy to consumers.
CIt has imposed a tax equal to P₁ – P₂ to discourage production.
DIt has purchased a quantity Q₂ – Q₁ for government use.
✓ Correct answer
A: It has given producers a subsidy to encourage greater output.
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