A-LevelEconomicsThe price system and the microeconomy9708/12 · Oct/Nov 2019 · Q181 Mark
A subsidy is given to the producers of a good with perfectly elastic demand. What will be the outcome?
AConsumer and producer receive equal amounts of subsidy.
BThere will be no change in price; the incidence of the subsidy will fall on the producer.
CThere will be a large increase in quantity consumed; the incidence of the subsidy will fall on the consumer.
DThere will be no change in the quantity consumed; the incidence of the subsidy will fall on the consumer.
✓ Correct answer
B: There will be no change in price; the incidence of the subsidy will fall on the producer.
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