The scenario
A government introduces a tax subsidy for electric cars, which simultaneously increases consumer demand (shift right) and producer supply (shift right). The market adjusts from the initial equilibrium to a new equilibrium with higher quantity and potentially ambiguous price change.
What is in this drawing
Read the decisions behind it.
01
Model subsidy as an external disturbance input
02
Represent market clearing as a feedback loop with price adjustment
03
Use demand and supply blocks that depend on both price and subsidy
When analyzing simultaneous shifts in both demand and supply due to a policy change, and the need to illustrate the dynamic adjustment to new equilibrium.
More like this