If a Government Wants to Encourage the Consumption of a Particular

question 63

Multiple Choice

If a government wants to encourage the consumption of a particular good, it should enact:

• A) a subsidy to buyers, as this will most greatly affect consumption of the good.
• B) a subsidy to sellers, as this will increase the amount of the good that is produced and offered for sale.
• C) a subsidy to buyers, as this will give the benefit to the more deserved party.
• D) a subsidy on either buyers or sellers, as both will have the same effect on the market.

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Definitions:

Utility Equilibrium

A state in consumer theory where a consumer efficiently allocates their income to maximize their total utility.

Marginal Utility Data

Marginal utility data refers to information that describes the change in utility or satisfaction a consumer derives from consuming one additional unit of a good or service.

Utility Maximization

The process by which individuals allocate their resources to maximize their subjective well-being or satisfaction.

Marginal Utility

The change in total satisfaction or utility that a consumer receives from consuming one additional unit of a good or service.