The benefit of a subsidy paid on each unit sold will go entirely to the sellers in the market if

Question

Quizplus · Accepted Answer

When supply is perfectly elastic, any increase in price (due to the subsidy) will not result in an increase in quantity supplied, as producers are already supplying as much as they can at the current price. Therefore, the entire benefit of the subsidy will be captured by the sellers, and not passed on to consumers in the form of lower prices.

The Benefit of a Subsidy Paid on Each Unit Sold