A subsidy can actually cause the consumption of subsidized goods to fall if:
A)the consumer has concave indifference curves.
B)the government prohibits resale of the good.
C)the price of other goods also falls.
D)the subsidized quantity of the good is fixed.

Question

Quizplus · Accepted Answer

When the subsidized quantity of a good is fixed, consumers cannot purchase more of the good at the subsidized price once the fixed quantity is exhausted. This can lead to a situation where the overall consumption of the good falls, as the subsidy does not apply beyond a certain point, potentially making the good less accessible or affordable overall.

A Subsidy Can Actually Cause the Consumption of Subsidized Goods