When the Purchase of a Good Is Subsidized, Economic Analysis

question 37

Multiple Choice

When the purchase of a good is subsidized, economic analysis indicates that

• A) the buyers of the product will gain at the expense of the sellers.
• B) the sellers of the product will gain at the expense of the buyers.
• C) the buyers and sellers will benefit equally.
• D) the more inelastic the supply of the good relative to its elasticity of demand, the larger the share of benefits that will accrue to the sellers of the product.

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Definitions:

Demand Curve

A graphical representation of the quantity of a good that consumers are willing and able to purchase at various prices during a given period.

Cross-Price Elasticity of Demand

A measure indicating how the quantity demanded of one good or service changes in response to a price change of another good or service.

Cross-Price Elasticity of Demand

The sensitivity measure of one good's demanded quantity to the price changes of a separate good.

Rice and Beans

A staple food dish in many cultures around the world, consisting of rice and beans as the main ingredients.