Question

The benefit of a subsidy will go primarily to sellers when the a. demand for the product is highly inelastic and supply is relatively elastic. b. demand for the product is highly elastic and the supply is relatively inelastic. c. subsidy is legally (statutorily) granted to the seller of the product. d. subsidy is legally (statutorily) granted to the buyer of the prod

Answer 1

Answer:

When demand for the product is highly elastic and the supply is relatively inelastic.

Explanation:

Subsidy is an amount of money given to companies by the government to boost production. It is an intervention by the government when economic situation in the free market is unfavourable.

When firms recieve money to boost production their cost of production is reduced.

If demand is highly elastic a small change in price will result in large change in quantity demanded. Companies will sell more goods at a reduced cost.

Of the supply is relatively inelastic there will be a degree of scarcity of the good so prices will go up, and the company willake more money.