Topic:Economics -case study
Subject:Economics
Volume: 1 page
Type: Case study
Description
Compare the change in sales of subsidized vis-à-vis non-subsidized fuel between 2011 and 2012. b. Suppose that the quantity demanded of Premium petrol is 8 million kilolitres at a price of Rp 14,500 per litre. For simplicity, assume that, before the cut in subsidy, Pertamina sold 28 million kilolitres of Premium. On a relevant figure, draw a demand curve for Premium petrol. (i) Mark the prices and quantities before and after the cut in subsidy; (ii) Calculate the change in the buyer surplus. c. Suppose that, before the cut, the government subsidy for Premium was Rp 3,000 per litre. Calculate the effect of the cut in subsidy on government expenditure. d. From the viewpoint of reducing government expenditure, which is better? Elastic or inelastic demand for petrol? e. How would the cut in subsidy affect: (i) Taxi drivers; (ii) Owners of taxi licenses; (iii) Pertamina; and (iv) Shell?
