Who actually benefits from a subsidy to sellers?

Question

Quizplus · Accepted Answer

The benefit of a subsidy to sellers depends on the elasticity of the supply and demand curves. If the curves are relatively elastic, meaning that the quantity supplied or demanded is highly responsive to changes in price, then consumers will benefit more from the subsidy as sellers will have to lower their prices to attract buyers. If the curves are relatively inelastic, meaning that the quantity supplied or demanded is not very responsive to changes in price, then sellers will benefit more from the subsidy as they can still sell their goods at a higher price, even with the subsidy. Therefore, the benefit is shared between the two parties depending on the elasticity of the curves.

Who Actually Benefits from a Subsidy to Sellers