Answer
a) The demand curve is pushed to the right. The effective price paid by consumers is lowered, the effective price collected by sellers increases, and the quantity of cones increases.
b) Consumers and producers both gain, while the government loses.
Work Step by Step
a) Please see the graph. The subsidy pushes the demand curve to the right, and the new demand curve is $D_{1}$. This causes the equilibrium price (the price received by sellers) to increase and the quantity of cones to increase. (The price received by sellers is noted as $P_{1}$, and the price paid by consumers is $P_{2}$.)
b) Consumers get to consume more cones at a lower price, and producers get to sell more at a higher price. However, since the government paid the subsidy, the government loses.
