The benefit of a subsidy will go primarily to buyers when the
A) demand for the product is highly inelastic and supply is relatively elastic.
B) demand for the product is highly elastic and the supply is relatively inelastic.
C) subsidy is legally (statutorily) granted to the seller of the product.
D) subsidy is legally (statutorily) granted to the buyer of the product.

Question

Quizplus · Accepted Answer

When demand is highly inelastic and supply is relatively elastic, buyers are less responsive to price changes, so they capture more of the subsidy benefit as sellers are more willing to adjust their prices.

The Benefit of a Subsidy Will Go Primarily to Buyers