1. In 2009 and 2010 the US government instituted a program where all first-time homebuyers received an $8,000 tax credit upon the purchase of a new house. In April 2010, just prior to the credit’s expiration, sales rose 7.6% and the median US home price rose 4% to from $167,000 to $174.000. Assume that all buyers received the $8,000 subsidy.

1. Show the effects of the subsidy on a graph.
2. Assuming that all buyers received the credit, estimate the own price elasticity of demand and own price elasticity of supply
3. Who gained more from the subsidy, buyers or sellers?

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