Ceteris paribus, the more elastic the supply curve, the larger the total subsidy.

Question

Quizplus · Accepted Answer

A more elastic supply curve means that suppliers can more easily adjust their production in response to changes in price. Therefore, a larger total subsidy would be needed to incentivize them to increase their production. On the other hand, if the supply curve were relatively inelastic, suppliers would not be able to increase their production as easily, so a smaller subsidy would be needed to achieve the same level of increased production.

Ceteris Paribus, the More Elastic the Supply Curve, the Larger