The benefit of a subsidy will go primarily to sellers 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 elastic and supply is relatively inelastic, sellers cannot easily change the quantity supplied, so they receive more of the subsidy benefit as they are less responsive to price changes compared to buyers.

The Benefit of a Subsidy Will Go Primarily to Sellers