Question: Suppose that the current price of a computer memory storage drive is $100 and that people are buying 1 million drives per year. In order

Suppose that the current price of a computer memory storage drive is $100 and that people are buying 1 million drives per year. In order to improve computer literacy, the government decides to begin subsidizing the purchase of new drives. The government believes that the appropriate price is $60 per drive, so the program offers to send people cash for the difference between $60 and whatever the people pay for each drive they buy.

a. If no consumers change their memory-storage drive- buying behavior, how much wills this program cost the taxpayers?

b. Will the subsidy cause people to buy more, fewer, or the same number of drives? Explain.

c. Suppose that people end up buying 1.5 million drives once the program is in place. If the market price of drives does not change, how much wills this program cost the taxpayers?

d. Under the assumption that the program causes people to buy 1.5 million drives and also causes the market price of drives to rise to $120, how much will this program cost the taxpayers?

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