A subsidy on a product will generate more actual benefit for producers (and less for consumers) when
A) the supply of the product is relatively inelastic.
B) the supply of the product is relatively elastic.
C) the demand for the product is relatively inelastic.
D) either b or c is true

Question

Quizplus · Accepted Answer

When the supply of a product is relatively inelastic, producers cannot easily change the quantity supplied in response to price changes, so they capture more of the subsidy benefit.

A Subsidy on a Product Will Generate More Actual Benefit