What determines the share of a subsidy that benefits consumers? If demand is rel

Question

What determines the share of a subsidy that benefits consumers? If demand is relatively more elastic than supply, consumers will benefit more from the subsidy than producers. OB. It depends on the type of subsidy. Obviously, if it's a consumer subsidy, the consumer receives the entire benefit. If demand is relatively less elastic than supply, consumers will benefit more from the subsidy than producers. Subsidies are used to induce firms to produce more output and therefore are designed to benefit producers.

Explanation / Answer

Subsudies are used to induce firms to produce more output and therefore are designed to benefit producers

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