If the U.S.demand for Korean steel is price elastic, an export subsidy granted to Korean steel firms will increase Korea's export revenue.

Question

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An export subsidy will lower the price of Korean steel in the U.S. market, leading to an increase in demand for Korean steel. If the demand for Korean steel in the U.S. is price elastic, the increase in demand will result in a proportionately larger increase in export revenue, as the price decrease will be more than offset by the increase in quantity demanded. Therefore, an export subsidy granted to Korean steel firms will increase Korea's export revenue.

If the USDemand for Korean Steel Is Price Elastic, an Export Subsidy