An excise subsidy given on each unit of X consumed will:
A)reduce consumption of X and lower total expenditures on X.
B)shift the budget line inward in a parallel manner.
C)place the consumer on a higher indifference curve.
D)cause the consumer to increase consumption of non-subsidized goods.

Question

Quizplus · Accepted Answer

An excise subsidy on each unit of X consumed effectively lowers the price of X relative to other goods, making it more affordable. This allows consumers to achieve a higher level of satisfaction or utility, represented by reaching a higher indifference curve, because they can now consume more of X for the same amount of money or achieve the same consumption level for less money.

An Excise Subsidy Given on Each Unit of X Consumed