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Impact of zero price items to the cost of the goods

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"Occasionally, the government offers goods and services at zero price. Explain what this does to the cost of that good, as well as the cost and price of other goods."

Explain more about what is going to happen by using the demand and supply curve. Also, the other goods can be substitute and complementary goods, so does these goods or services get affects by the zero price?

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Detailed solution with a diagram is attached.

If the government offered goods and services at zero price, the cost of the good or service in question is likely to increase. This is the case because the demand for the product will be enormous because everybody rich or poor enjoys free things. As the ...

Solution Summary

This solution details the impact of zero price items to the cost of the good involved as well as other goods.