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Supply and demand diagrams

Hi there, I'm doing "business environments" as part of my common first year in business at university, and I cannot seem to get my head around this question.

"Using demand and supply diagrams, answer this question:
The Government decides to give a subsidy to tea producers but not to coffee. Other things being equal, what will happen to the equilibrium price and quantity for both tea and coffee?"

The question itself doesn't seem too hard, but showing it on a graph is much more difficult to me. Any help would be appreciated!

Reply 1

Simes

Do more than one graph. ""Using demand and supply diagrams, …"

Do one before government subsidy starts and another one after. If you know what the subsidy will do to tea prices, this should be possible. And take a punt on what it will do to coffee demand & price.

(edited 9 years ago)

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